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THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 
LOS  ANGELES 


TlIK 


Restoration  of  the  Currency. 


El  I 

I 


i  I 


V>Y    .1  AMES    S.   PIKE, 


LATE  M1M8TER  TO  THE  HAGUE. 


REPUBLISHED    FROM    THE   NEW    YORK    TRIBUNE. 


t   1 


New  Youk: 

SUN    .lOH     PKINTINU- HOUSE,    PRL\TIN<i -TTOUSE     SQUARE 

1868. 


I 


\ 


I 


THK 


Restoration  of  the  Currency. 


BY    JAMES    S.   PIKE, 

LATB   MINISTER  TO  THE  HAOCE. 


REPUBLISHED    FROM    THE    NEW    YORK    TRIBUNE. 


Nkw  York  : 
SUN   JOB    PRTNTING-HOUSE   PRINTING-HOUSE    SQUARE 

1868. 


HO, 


'Zf 


1^ 


^ 


THE  RESTORATION  OF  THE  CURRENCY. 


CHAPTER  I. 

FIRST    DUTY    OF    GOVERNMENT. FULL    SUPPLY    OF    THE    PRECIOUS 

METALS, 

It  helony-s  to  Governmeut  to  establish  fixed  and  invariable 
standards  of  weight,  measure,  and  value,  and  we  may  add,  to 
enact  general  provisions  of  law  for  the  generous  development 
and  adequate  protection  of  its  industry.  After  this,  it  should 
take  its  hand  entirely  off  business  affairs.  When  the  community 
recpiires  agencies  of  one  sort  and  another  to  facilitate  their 
transactions,  whether  they  be  manufacturing,  transportation, 
trading,  or  banking  companies,  there  should  be  no  limitation 
nor  hindrance  to  the  accomplishment  of  their  desire,  except  the 
limitations  of  general  laws  to  secure  the  public  against  fraud  and 
im])osition.  The  measure  of  its  wants  should  be  left  to  itself. 
The  country  really  needs  nothing  now  so  much  as  for  the  (iov- 
enmient  to  jset  out  of  the  mischievous  and  anomalous  attitude  in 
money  affairs  into  which  it  was  involuntary  ])lunged  1)V  the 
slave-holdei-s*  Rebellion.  It  intruded  itself  into  the  markets, 
and  became  a  huge  and  universal  ]»in-chaser.  It  came  upon 
every  pul)lic  exchange,  and  went  into  every  private  circle,  and 
became  a  universal  borrower,  it  made  itself  the  issuer  of  every 
form  of  ohligation  that  anybody  would  take.  All  of  which  con- 
duct was  unavoidable,  but  e(pially  unnatural  and  dejdorable. 
The  result  has  been,  first,  great  i>ros])erity  to  the  trading  and 
producing  world;  and  second,  great  and  corres])onding  suffering 
and  disaster,  in  the  prbsence  of  which,  still  growing,  still  acumu- 
lating,  we  now  stand.  The  end  will  be  reached  when  this  un- 
natural state  of  thiny-s  is  brouy-ht  to  a  final  termination,  and  not 


1 C67339 


till  then.     And  it  is  everybodys  interest  that  it  should  be  termi- 
nated as  soon  as  possible. 

Now  the  Government  has  long  been  out  of  the  field  as  a 
gigantic  purchaser,  leaving  trade  to  its  natural  supports,  namely, 
the  wants  of  regular  consumei-s.  Its  next  palpable  duty  is  to 
fund  its  obligations  and  provide  for  the  interest  thereon,  and 
above  all,  to  take  up,  get  out  of  sight,  the  notes  with  which  it  has 
flooded  the  country  during  its  great  necessities,  to  the  violent 
and  illegal  exclusion  of  the  universal  standard  of  value.  The 
only  really  vital  and  enduring  interest  which  Congress  and  the 
business  community  have  in  this  process,  consists  in  their 
wishing  it  godspeed,  and  aiding  it  all  that  lies  in  their  power. 
But  behold  what  they  do.  They  clamorously  urge  that  the 
Government  shall  not  pay  its  notes,  nor  withdraw  them  from 
private  hands  even  to  the  extent  it  has  the  desire  and  the  means 
wherewith  to  retire  them !  Can  anything  be  more  preposterous 
than  this,  in  view  of  the  palpable  causes  of  our  depressed  finan- 
cial condition?  Because  all  healthy  industry,  and  all  legitimate 
trade  needs  nothing,  and  can  bear  nothing  but  a  fixed  standard 
of  value,  or  its  paper  representative,  always  convertible  into  the 
standard  itself,  or  what  is  the  same  thing,  products  measured  by 
the  standard  price. 

Happily,  there  can  be  no  longer  any  pretense  that  we  cannot 
realize  this  result  after  our  great  expenditures,  since  the  world  is 
at  this  hour  full  of  the  precious  metals.  The  banks  of  all  specie- 
paying  countries  are  stuflfed  with  them.  There  was  never  such 
hoards  accumulated  before  since  banks  existed,  and  the  channels 
of  trade  and  circulation,  are  filled  with  them  in  every  country 
but  this.  In  addition  to  this,  the  golden  stream  of  our  own 
products  is  pouring  its  flood  over  the  mountains,  and  over  the 
Isthmus  at  the  rate  of  a  hundred  millions  a  year.  ITow  lamen- 
table, how  childish,  how  imbecile  in  us,  wit];i  all  our  boasted 
riches,  and  enterprise,  and  pluck,  under  such  circumstances  of 
aflauence  of  the  precious  metals,  to  stand  timid  and  api)rehensive 
before  the  bold  speculators  and  monopolizers,  greedy,  unscrupu- 
lous, bankrupt,  who  cry  out  for  a  continuance  of  the  existing 
system  of  national  impoverishment  and  disgrace. 


CHAPTER  II. 

CONDITION    OF    THE    PAPER    CIRCULATION. ERRORS    OF    THE    INFLA- 
TIONISTS.  CAUSE   OF   THE    PRESENT   DEPRESSION    OF   TRADE. 

What  Cono:ressional  discussion  seems  sorely  to  need,  is  that 
somebody  should  uncover  the  foundations  of  <Mir  subject,  and 
plant  a  few  corner-stones  on  which  an  intellifrible  review  of 
the  whole  question  can  be  reared.  The  iirst  requisite  in  a 
good  physician  is  the  skill  to  make  a  good  diagnosis.  He 
must  fii-st  be  able  to  tell  what  ails  his  patient  before  he  can  begin 
to  cure  him.  Congress  in  legislating  anew  on  the  financial  ques- 
tion, should  begin  by  exijoundiiig  the  situation,  and  then  we  can 
all  be  the  better  judges  of  its  intelligence,  and  the  wisdom  of  its 
proposed  measures. 

We  have  had  a  great  war.  The  Government  has  been  an 
enormous  purchaser  and  consumer,  and  has  tilled  the  channels  of 
trade  with  its  promises  to  pay.  Many  have  been  paid.  Many 
remain  outstanding.  Its  demand  notes  used  as  money  during 
and  since  the  war,  have  swollen  the  circulation  immensely.  The 
Secretary  of  the  Treasury,  under  Congressional  guidance,  has 
been  slowly  paying  these  notes,  retiring  them  with  a  view  to  the 
ultimate  resumption  of  specie  payments.  He  wishes  to  be 
allowed  to  go  on  with  the  process,  which  Congress  sanctioned 
in  the  outset  with  remarkable  unanimity. 

The  process  is  most  natural  and  inevitable,  if  we  are  ever  to 
return  to  specie.  But  it  turns  out,  as  everybody  of  any  thought 
knew  it  must  turn  out,  that  the  process  of  contraction  is  not  so 
easy  nor  so  profitable  as  the  process  of  inflation.  And,  although 
the  contraction  has  not  proceeded  so  far  as  to  reduce  the  premium 
on  specie,  gold  being  worth  as  nmch  in  ]»ai»er  as  it  was  a  year 
ago.  yet  a  great  outcry  is  raised  that  the  business  of  the  country 
is  being  ruined  by  the  process.  The  evidence  of  this  being  fomid 
in  falling  markets  and  general  stagnation. 

In  this  consists  the'fnudanu'ntal  error  of  the  inflationists,  in 
which  it  is  easy  to  see  Mr.  iShernian  j)articipates,  from  a  remark 
he  casuallv  let  fall  durino;  a  late  discussion,  when  asked  when  he 


0 

proposed  to  resume  contraction,  he  replied  :   "  As  soon  as  the  busi- 
ness of  the  country  revives  and  becomes  prosperous." 

Xow,  the  real  truth  is,  that  the  existine;  financial  situation,  the 
pressure  and  distress  in  certain  tradin<r  and  producing  circles,  is 
not  to  l)c  attributed  to  the  contraction  of  the  currency  but  to 
totally  ditferent  causes.  First  to  be  mentioned  is  superabundant 
production  and  relaxed  consumption ;  second  is  the  natural  re- 
action from  extravagant  to  moderate  prices,  which  always  follows 
a  period  of  high  commercial  and  speculative  excitement ;  a  re- 
action growing  out  of  the  nature  of  things,  and  which  often  takes 
place  without  any  reference  to  the  volume  of  money  in  circula- 
tion. It  being  merely  a  contest  between  buyer  and  seller,  in 
which  the  buyer  always  wins  in  the  long  run,  because  of  his  in- 
ability long  to  pay  extravagant  rates.  A  third  and  connnanding 
reason  is  the  distrust  of  capital  which  always  withdraws  on  de- 
clining markets ;  and  when  affairs  are  agitated  and  unsettled, 
waits  for  them  to  get  into  a  natural  condition. 

The  business  of  the  coimtry  languishes  for  want  of  con- 
sumers. Capitalists  and  prudent  men  everywhere,  seeing  the 
reaction  from  the  high  excitements  of  the  war,  and  the  unnatural 
condition  of  the  currency,  are  waiting  for  things  to  touch  bottom, 
knowing  that  there  is,  and  can  be  nothing  solid  till  we  reach 
specie  ])ayments.  The  naked  truth  is,  that  we  have  reached  the 
settling  time  of  a  long  career  of  the  speculators,  the  middlemen, 
the  operators  in  every  walk,  and  even  of  the  great  producing 
establishments,  and  the  Government  itself.  And  this  settlement 
is  not  to  be  avoided.  AfYer  every  storm  comes  a  calm  ;  after 
every  excitement  a  relapse.  The  history  of  the  whole  trading 
world  is  tilled  with  just  such  examples.  Inflation  is  followed  by 
collapse ;  high  prices  by  low ;  great  profits  by  great  losses ;  un- 
natural excitement  by  corresponding  depression  ;  extravagance 
by  economies.  But,  above  all,  the  gigantic  evils  of  an  irredeem- 
able paper  currency  were  never  overcome  or  escaped  from  but  by 
severe  sacrifices. 

Such  being  the  condition  of  things,  what  signifies  it  that  we 
arrest  contraction,  or  even  renewedly  inflate  the  currency  'i  The 
channels  of  circulation  are  over  full  now.  No  sui)ply  of  paper 
money  can  create  one  single  consumer,  and  it  is  consumers,  that 
are  wanted  to  make  trade  active  and  business  prosperous.     It  is 


allejied  on  tlie  floor  of  Congress,  that  there  is  great  distress  among 
workingnien  ;  only  low  wages  and  scarcity  of  work.  What  sui- 
cidal folly  to  inflate  or  continue  inflation,  and  thus  enhance  the 
prices  of  living  to  them,  when  no  issue  of  paper  money  can  give 
them  a  day's  work.  We  are  just  entering  upon  a  new  phase  of 
our  paper  money  experience.  We  are  now  to  see  the  joint  oper- 
ation of  the  oppression  and  robbery  of  the  laboring  classes  by 
means  of  an  inflated  currency. 


CHAPTER  III. 

DISASTROUS    EFFECTS    OF   AN    INFLATED   CURRENCY    ON    THE 
LABORING    CLASSES. 

It  has  long  been  a  current  maxim  that  no  scheme  was  ever 
invented  so  etfectual  for  the  impoverishment  of  the  laboring 
man  ;  to  make,  in  a  word,  the  rich  richer,  and  the  poor  poorer, 
as  the  circulation  of  irredeemable  paper  money.  This  is  easily 
explained.  An  inflated  currency,  in  the  tirst  instance,  enhances 
the  prices  of  all  commodities,  not  always  or  necessarily  affecting 
the  wages  of  labor.  The  laborer,  under  a  depreciated  currency 
pays  more  for  his  living  and  gets  no  more  for  his  work.  If  it  be 
said  that  this  is  not  our  experience,  we  may  acknowledge  the 
fact  without  controverting  the  argument,  since  our  condition 
was  exceptional  during  the  war,  when  the  demand  for  men  for 
consumption  was  as  great  as  for  everything  else.  But  this  con- 
dition being  terminated,  the  demand  for  labor  falls  to  its  natural 
level.  And  we  now  see  that  the  price  of  labor  has  fallen  ma- 
terially, and  the  demand  is  unequal  to  its  employment,  while 
the  price  of  living  is  in  no  way  lessened ;  or  at  best,  not  lessened 
in  any  corresponding  degree  to  the  falling  off  in  the  demand  for, 
and  in  the  wages  of  labor.  This  is  the  simple  matter  of  fact, 
which  has  found  full  expression  on  the  floor  of  Congress. 

Now  what  is  the  philosophy  of  it  i  The  excessive  supply  of 
the  circulating  medium  stimulates  all  sorts  of  speculation,  and 
at  the  same  time  enables  speculators,  and  operators,  and  cajtitalists 
to  monopolize  and  hold  for  enhanced  prices  all  articles  of  prime 


8 

necessity,  such  as  breadstuifs  and  provisions  of  all  sorts.  This  is 
the  state  of  thino-s  to-day.  The  West  is  the  great  producer  and 
factor  of  these  products.  Every  article  of  food  is  now  almost,  or 
quite  as  high  as  during  the  war,  enjoying  famine  prices,  and  this, 
owing  to  a  considerable  extent,  to  the  gigantic  speculations  in 
those  commodities,  through  the  intervention  of  a  swollen  paper 
currency.  Yet  the  same  West  is  discontented,  and  clamors  for 
more  paper  money  for  speculation,  and  to  enable  them  to  realize 
yet  higher  prices.  This  may  do  for  Senators  Sherman  and 
Morton,  but  it  is  grinding  the  laboring  consumer  between  the 
upper  and  nether  millstone. 

If  it  be  asked  why  the  rule  of  increased  prices  under  an  in- 
flated currency  does  not  apply  to  labor  as  well  as  to  other  things, 
the  answer  is  plain.  Labor  cannot  hoard  itself  in  warehouses  and 
granaries.  It  is  compelled  to  sell  itself  day  by  day.  It  is  pre- 
eminently a  perishable  article.  Its  whole  daily  aggregate  value 
is  sunk  and  lost  every  day  it  is  unemployed.  And  as  it  cannot  be 
capitalized,  so  to  speak,  and  held  in  mass  (cooperative  industry  not 
having  yet  reached  this  point),  it  is  in  constant  and  unnatural 
competition  with  itself.  And  herein  consists  the  essential  differ- 
ence in  this  respect  between  labor  and  commodities,  which  can  be, 
and  are  seized  and  held  for  high  prices  by  capitalists  and  specu- 
lators, and  which  a  plethora  of  the  circulating  medium  is  the 
great  agent  in  accom}>lishing. 

The  reduction  of  the  currency  under  the  contraction  policy, 
acting  with  other  potent  causes,'  such  as  over-production  and  the 
natural  collapse  of  undue  ex])ansion,  has  already  reduced  prices 
very  materially  in  many  important  branches  of  trade.  It  has 
brought  down  the  prices  of  many  imported  and  domestic  fabrics 
within  tlie  reach  of  thousands  of  poor  consumers.  This  fall  of 
prices  has  been  of  inestimalde  benefit  to  the  country.  But  the 
policy  of  Messrs.  Sherman,  Morton  and  Company,  tend  directly 
to  a  rise  of  prices  again  in  the  articles  which  have  given  way  in 
price,  and  thus  will  operate  as  a. new  burden  upon  the  masses 
of  consumers.  At  the  same  time  it  will  tend  to  advance  the 
already  exorl^itant  rates  oi'  living,  and  furnish  no  demand  for 
labor,  and  no  increase  in  its  price. 

The  great  fact  projecting  itself  as  plain  as  noon-day,  is,  that 
we  are  in   a  transitional,  state  which  paralyzes   enterprise  and 


9 

affrights  capital,  and  that  tlius  no  tinkering  of  tlie  currency  can 
stimulate  trade  or  production,  and  so  relieve  the  condition  of 
tliinirs.  so  fur  as  lalxir  is  concerned.  (Jcntlcnicii  may  as  well 
understand  then,  that  they  thus  may  fail  to  get  as  many  votes  as 
they  will  lose  by  their  intlati(»n  policy,  and  find  when  it  is  ton  late, 
that  ])olitics  and  tinance  had  better  lie  ke])t  se])arate. 


ClIAPTEK  lY. 

LIKELIHOOD    OF    FUKTHEK    INFLATION. CAUSES    OF    SCARCITY    OF 

MONEY    IN    THE    SOUTH. 

The  fact  that  the  Senate  has,  by  eight  majority,  refused 
to  commit  itself  against  issuing  additional  currency,  coupled  with 
Senator  Henderson's  fervent  declaration  that  lie  desired  an 
increase,  and  Senator  Morton's  well-understood  concurrence  in 
these  \news,  is  evidence  of  the  underset  of  the  currents  in  the 
Senate  toward  more  irredeemable  pa])er. 

The  reason  this  error  is  likely  to  be  connuitted  is  ])lain.  The 
men  who  favor  it,  and  those  who  are  toying  with  it,  unwilling 
to  say  yes  or  no,  fatally  mistake  the  character  of  our  financial 
disorders,  believing  and  asserting  them  to  arise  from  a  deficiency 
of  the  circulating  medium.  If  this  be  true,  the  circulation 
ought  to  be  increased;  and  if  it  l)e  not  true,  why  the  precipitate 
legislation  of  Congress  to  stop  its  further  diminution  at  all 
hazards,  and  without  reference  to  the  ability  of  the  Government 
to  take  u])  its  ol»ligations  at  a  moderate  rate,  or  to  future 
changing  eireuiiistances  ^  Relief  is  exi)ected  from  arresting 
contraction.  More  relief  would  then  certainly  follow  from  a 
"judicious'''  addition  to  the  circulation.  Is'nt  this  the  logic  of 
the  case?  Mr.  Sherman  said  in  <lebate,  that  he  did'nt  e.xpect  the 
country  to  resume  ccmtractioii  ;  in  other  words,  again  move 
towards  s])ecie  })ayments,  "  until  tin-  prosperity  of  the  country 
revived  T'  Showing  that  he  looks  for  "  revived  pi-osperity"  under 
the  present,  and  if  necessary,  a  still  more  intlated  state  of  the 
currency.  This  statement  of  itself  discloses  the  unsoundness  of 
Mr.   Sherman's  fundamental   ideas  on  the  whole  subject,  and 


10 

shows  that,  whetlier  he  admits  it  or  not,  he  is  at  bottom  an 
inflationist.  What  etlect  }>ul)lic  opinion,  or  public  discussion  may 
have  on  Mr.  Sherman's  action^  is  another  thing.  He  is  a  gentle- 
man of  sharp  instincts  and  amiable  intentions — too  amiable  we 
fear  sometimes. 

In  the  main,  therefore,  the  debates  and  votes  of  the  Senate 
lead  to  the  conclusion  tliat  the  finances  of  the  country  are  in  the 
hands  of  the  inflationists,  and  that  instead  of  money  affairs 
being  on  the  path  of  improvement  as  they  have  been  for  a  year 
past,  we  are  likely  to  get  further  into  the  mire  of  dishonored 
obligations,  of  disgraced  national  reputation,  and  increased 
robberv  of  the  earninp-s  of  labor. 

When  it  shall  be  seen,  as  it  will  be  seen,  that  forbidding  the 
Government  to  pay  even  that  portion  of  its  debts  that  it  shall 
from  time  to  time  feel  able  to  pay,  (for  that  is  all  there  is  in  the 
act  of  retiring  greenbacks,)  will  not  be  of  the  slightest  moment 
in  revi\ang  trade  and  industry,  that  it  will  do  nothing  toward 
em})loying  labor  or  enhancing  its  wages,  that  it  will  not  relieve 
our  manufacturing  industry  of  the  burdens  from  which  it  suffers, 
that  it  will  not  create  one  domestic  consumer  the  more,  and  has 
the  inevitable  consequence  of  destroying  all  foreign  consumption 
of  our  fabrics,  what  shall  we  see  ?  Why,  that  the  Hendersons 
and  the  Mortons,  and  probably  by  that  time  the  Shermans,  too, 
will  try  to  improve  upon  their  present  policy  by  giving  relief  in 
the  shape  of  more  greenbacks.  If  they  continue  to  insist,  as 
unquestionably  they  will  continue  to  insist,  that  the  great  want 
of  the  country  is  an  enlarged  paper  circulating  medium,  why 
should  tliey  not  { 

The  real  foundation  of  all  this  complaint  about  the  scarcity  of 
money  in  certain  (piarters,  is  to  be  found  in  the  condition  of  the 
people.  There  is  depression  everywhere,  and  throughout  the 
South  there  is  exhaustion  and  ruin.  It  wouljl  not  add  to  the 
riches,  nor  make  money  any  plentier  in  the  Southern  country  if 
a  bank  of  a  million  of  dollars  cai)ital  were  to  be  planted  in  every 
town  <jf  10,000  inhabitants  therein.  The  difliculty  is  want  of 
solvent  borrowers,  or,  in  other  words,  of  men  who  can  respond 
promptly  to  their  engagements  at  maturity.  These  are  what 
make  banks,  and  sustain  banks,  and  where  they  are  not,  banks 
cannot  exist.     We  dare  confidently  afiirm,  that  the  whole  South 


11 

and  South- West  could  to-day  be  tilled  to  overflowing  with  nionev, 
without  a  ijreeidjac'k  or  a  bank,  if  it  only  had  the  wherewith  to 
exchanj^e  for  money.  If  it  was  full  of  c(jtt(»n  and  corn,  and 
sugar,  the  factors  of  every  nation,  and  of  all  })arts  of  this  nation, 
are  already  on  the  spot  to  oflf'er  full  e(juivalents  in  gold  or  silver, 
or  greenbacks,  for  every  dollar's  woi'tli.  It  is  not  greenbacks 
that  are  wantini;.  It  is  not  monev  that  is  wantinir.  It  is  the 
connnodities  with  which  to  exchange  for  money,  or  the  credit 
which,  to  some  extent,  stands  in  their  stead.  Money  goes  over 
the  world  everywhere  where  there  is  anything  to  ])ay  for  it.  In 
the  jn-ofusion  of  the  precious  metals  of  our  days,  banks  are  not 
essential,  paper  nu>ney  is  not  essential,  and  least  of  all  is  the 
wretched  expedient  of  irredeemable  (xovernment  notes,  which 
legitimate  commerce  scorns  and  stamps  with  discredit ;  needed 
to  fill  the  channels  of  circulation.  So  plain  are  these  propositions 
that  the  bare  statement  of  them  is  sutficient  to  confute  and 
condemn  the  statesmanship  of  every  man  who  holds  that  a  nation 
is  enriched,  or  a  ))eo])le  raised  from  poverty  to  affluence,  or  its 
trade  revived,  or  its  labor  employed,  or  its  productions  increased, 
simply  by  the  expedient  of  issuing  Government  jjromises  to  pav, 
or  bank  notes. 

These  are  but  the  tokens  of  trade  and  exchanii'e,  the  airencies 
of  distribution,  and  as  there  is  in  the  existing  volume  of  our 
irredeemable  pajier  money,  more  circulation  than  the  country 
ever  used  on  a  specie  basis,  by  far,  it  is  fair  to  say  that  there  is 
more  afloat  now  than  is  necessary  for  every  part  of  the  countrv 
at  this  moment,  and  therefore  the  suggestion  of  such  a  method 
of  relief  as  a  remedy  for  existing  evils  in  the  South  and  elsewhere, 
is  made  in  total  ignorance  of  the  cause  of  our  disordei's,  and 
instead  of  making  thiuoS  better,  would  only  make  them  worse. 


CHAPTER   V. 

RESUMPTION    OF    SPECIE    PAYMENT    TUK    ONLY    CUKE    OF    OUR    DISOK- 

DER8. SCHEMES    OF    ALL    SORTS. SIMPLICITY    OF 

THE    TRUE    METHOD. 

Resumption    will   rare  our  tinancial  dis»»rders,  and    nothing 
else    will.       So   long   as   our    linances   remain    blocked   as    now, 


12 

moving  in  no  direction,  we  are  like  a  ship  at  sea  in  a  calm,  with 
the  sails  idly  tla])])ing  against  the  mast.  Everybody  waits  for  a 
wind  from  some  quarter.  We  are  the  dead  dog  on  the  river,  car- 
ried down  on  the  ebb  and  back  on  the  flood-tide  daily.  And  so 
we  shall  be  till  a  i'v&^h,  healtliy  current  sets  in,  and  sweeps  far  to 
sea  all  the  stagnant  rubbish  that  now  chokes  the  channels. 

We  have  arrested  contraction,  and  now  we  wait.  Wait  for 
what  ^  AYait  for  revived  trade,  for  renewed  demand  for  labor, 
for  fresh  consumers,  for  new  enterprises.  Who  is  going  to  take 
the  initiative  in  the  hoped-for  revival  'i  Nobody.  There  is  not 
one  branch  of  business  that  can  be  entered  upon  in  the  present 
state  of  things,  involving  anything  more  than  a  hand-to-mouth 
operation,  which  must  not  encounter  a  risk  of  a  change  in  the 
condition  of  money  affairs  sufficient  to  deter  every  solvent,  pru- 
dent man  from  embarking  therein.  Nobody  knows,  nor  can  guess 
what  is  before  us.  So  long  as  we  were  moving  steadily,  though 
it  might  be  slowly,  toward  resumption,  there  was  at  least  some 
encouragement  to  trade  and  enterprise,  a  feeling  that  we  were 
approaching  a  solid  foundation,  from  which  national  and  individ- 
ual prosperity  would  soon  begin  to  rise  again.  We  were  sub- 
mitting to  a  healing  process,  which,  if  a  little  painful,  at  least 
promised  a  cure,  Now  we  have  thrown  away  our  splints  and 
our  remedies,  and  stopped  even  trying  to  get  better.  The  quacks 
surround  the  patient.  One  set  has  a  grand  plan  of  pitching  all 
the  bants  overboard  and  substituting  greenbacks  for  their  bills, 
and  so  save  interest  and  taxation.  Another  advocates  sending 
abroad  and  buying  $250,000,000  in  coin,  and  paying  $350,000,000 
in  bonds  therefor,  to  bring  home  and  spread  over  the  country  like 
60  much  top-dressing  to  sprout  our  moss-grown  fields  of  paper 
money.  Another  proposes  to  issue  $200,000,000  more  of  paper 
money  to  give  the  necessary  flllip  to  declining  trade,  and  refill 
cliannels  of  circulation  which  Mr.  McCuUoch  has  so  mercilessly 
drained  dry.  Yet  another  clamorous  crowd  insists  upon  issuing 
greenbacks  enough  to  pay  off  the  bondholders,  and  in  this  way 
honorably  discharge  our  debt,  Micawber  like,  to  the  last  dollar. 
Another  persistently  favors  an  endless  chain  running  through 
the  Treasury,  carrying  paper  fabrications  in  and  out,  operating  a 
perpetual  conversion  of  Treasury  Bonds  into  greenbacks,  and 
greenbacks  into  Treasury  Bonds,  at  the  desire  of  the  holders,  and 


13 

offers  it  as  a  panacea  for  all  our  ills.  Then,  again,  it  is  proposed 
that  the  Finance  Committees  of  Congress  shall  take  charge  of  the 
whole  business  of  emitting  ])aper  money,  as  they  aim  to  do  now, 
and  decide  when  the  country  w:iiit>  iiioi-c  and  when  it  wants  less, 
and  so  regulate  thesu]))»ly. 

This  is  but  the  briefest  outline  sketch  of  the  more  approved 
schemes  now  on  foot  to  restore  our  tiuances — not  broached,  be  it 
remembered,  by  unauthoritative  or  unintelligent  persons,  Imt  by 
Senators  and  Rei)resentatives  in  their  seats — men  who  are  as- 
sumed to  represent  the  wisdom  and  not  the  folly  of  the  nation. 

Is  not  a  glance  at  this  recital  enough  to  show  that  any  course 
which,  at  one  swing  of  the  scythe,  cuts  down  this  whole  crop  of 
follies  and  crudities,  and  restores  the  natural  condition  of  the 
country,  and  removes  the  whole  sul)ject  from  the  vexatious  criti- 
cisms and  damaging  action  of  Congress,  must  be  meritorious? 

Unlike  these  theory-mongers,  we  plead  for  no  ingenious  or 
untried  scheme  of  iinance,  no  wire-drawn  system  of  outs  and  ins, 
of  weights  and  balances,  of  exchangeability  and  convertibility, 
or  patent  method  of  paying  debts  and  saving  taxes ;  but,  simply 
and  plaiidy,  urge  that  Congress  shall  let  the  money  question  aJone, 
after  repealing  the  exceptional  legislation  of  the  war,  and  remit 
the  entire  subject  to  the  regulation  of  the  natural  laws  of  trade, 
where  it  belongs.  Let  us  have,  first,  a  repeal  of  the  Legal  Ten- 
der act — ;just  as  guarded  and  judicious  in"  its  form  as  you  please  ; 
then  remove  your  obstructive  legislation,  which  now  prevents 
the  Treasury  from  paying  its  obligations  when  it  has  the  means 
to  do  so ;  allow  Mr.  McCuUoch  to  })ay  his  debts  when  he  can, 
and  don't  forbid  him  on  the  ground  that  he  is  ruining  the  coun- 
try. Let  Congress  warn  its  pai^er-mills  that  they  will  1»e  ex- 
pected to  do  like  honest  people,  and  pay  the  debts  they  contract 
to  pay  at  the  time  they  contract  to  pay  them.  What  an  abom- 
inable imposition  is  it  upon  common  sense  to  be  told  that  the 
bank  ownei*s  must  not  be  asked  to  pay  their  debts,  in  other 
words,  to  redeem  their  notes,  because  it  would  thereby  injui-e  the 
puV>lic!  And  what  a  shocking  fatuity  is  it  that  regards  the  Na- 
tional obligations  in  the  same  light!  Does  not  every  one  see 
and  know  that  for  every  dolhii-  a  dcbtoi-  i>ay>,  whether  he  l)e 
Government  or  bank,  the  creditor  must  receive  a  dollar^  AVhy 
then  fear  the  operation  ? 


14 

Thus  simple  is  the  true  plan  for  the  restoration  of  our 
finances.  Getting  back  to  a  solid  bottom  on  which  to  plant  our 
future  prosperity,  consists  in  nothing  but  the  process  of  paying 
debts.  Paying  debts  resumes  specie  payments,  without  any 
planning  or  scheming,  or  kite-flying  of  any  sort.  It  is  the 
home-spun  solution  of  all  our  difficulties.  And  why  shouldn't 
people  pay  their  debts  just  as  fast  as  they  are  able?  Why 
shouldn't  the  banks  be  made  to  pay,  and  why  shouldn't  Govern- 
nu^nt  be  allowed  to  pay  its  suspended  cuiTent  obligations, 
which  encumber  the  channels  of  circulation  to  the  exclusion  of 
a  sound  currency ;  a  currency  which,  if  allowed,  would  speedily 
flow  in  to  fill  their  place  ?  The  banks  are  rioting  in  their  gains, 
having  made  money  for  years  as  banks  never  made  money  be- 
fore. We  have  only  to  note  the  dividend  notices  in  the  public 
journals  to  know  this.  The  Government  can  retire  so  many  of 
its  demand-notes  as  to  raise  the  value  of  the  residue  to  specie 
after  a  comparatively  brief  period.  And  with  the  demand  ob- 
ligations of  these  two  great  debtor  interests  (each  powerful  and 
full  of  resources),  elevated  to  their  legitimate  exchangeable  value, 
every  theoretic  scheme,  every  fanciful  ])lan  of  the  speculators,  and 
inflaters,  and  gamblers,  will  disappear  like  the  evanescent  shapes 
of  a  dissolving  view.  Then  the  country  will  awake  to  a  new 
solvency  and  a  solid  prosperity,  under  the  stimulus  of  a  flood  of 
the  precious  metals  whicli  will  be  passed  into  the  channels  of 
circulation,  to  which  it  has  long  been  a  stranger,  and  to  which  it 
will  be  forever  a  stranger  till  that  day  comes. 


CHAPTER  VI. 

ABILITY    OF    THP:    GOVERNMENT    AND    THK    BANKS    TO    RESUME. 

Can  the  great  debtor-interest  in  this  country,  namely,  the 
banks  and  Government,  pay  enough  of  their  indebtedness  to 
bring  about  resumption?  It  is  the  mass  of  supei-fluous  unpaid 
obligations  afloat  that  kee])s  us  in  a  state  of  suspension.  If  the 
banks  would  redeem  their  bills,  and  the  Government  would  pay 
its  greenbacks  when  presented,  this  would  be  resumption.     But 


15 

the  banks  need  not  redeem  all  their  hills,  nor  the  Government 
pay  all  its  p;reenhacks  to  effect  this  object.  It  is  only  needed 
that  these  two  ^reat  debtor-interests  should  pay  oflf  so  many  of 
these  two  classes  of  oblii^ations  as  are  not  wanted  in  circulation. 
Resumption  will  not  require  them  to  ])ay  any  more. 

Let  us  see  if  we  cannot  in  some  measure  demonsti'ate  to  the 
more  reasonable  of  our  apprehensive  friends  that  the  country  is 
able  to  retire  its  paper  money  so  far  as  to  resume  specie  payment 
without  an  undue  strain  on  its  resources. 

That  portion  of  the  circulation  issued  by  the  Government  has 
already  been  brought  down  by  Mr.  McCuUoch  within  manageable 
compass,  as  we  see  by  examining  the  following  table. 

On  the  1st  of  January,  1868,  the  Government  had  in  circula- 
tion, in  round  numbers : 

Greenbacks $356,ftno,OOn 

Fractional  Currency 31,0(10.000 

Interest-bearing  Legal  Tenders 72,000,000 

Total $459,000,000 

These  items  have  been  reduced  since  the  close  of  the  war  from 
an  aggregate  of  $709,000,000.  This  has  been  done  without 
making  money  scarce,  without  advancing  the  rate  of  interest, 
without  reducing  the  loans  of  the  banks,  and  without  lowering 
the  price  of  coin,  thus  clearly  indicating  that  the  small  proportion- 
ate reduction  yet  to  be  made  in  order  to  realize  specie  payments 
may  be  accomplished  with  comparative  ease.  And  if  the  ideas 
of  those  who  hold  that  our  circulation  is  not  redundant  are 
correct,  without  any  disturbance  whatever.  That,  in  fact, 
resumption  from  this  point  would  result  rather  in  an  increase 
than  a  diminution  of  the  circulating  medium.  A  consideration 
by  no  means  to  be  overlooked. 

If  we  turn  to  the  banks  we  shall  tiiul  that  on  tlie  1st  of  Jan- 
uary, 18f)8,  they  had  bills  in  circulation — three  hundred  and 
three  millions,  in  round  numbers,  showing  the  aggregate  of  paper 
circulation,  which  the  Government  and  the  banks  have  jointly 
to  protect  in  the  event  of  resumption  to  be  as  follows : 

Bank  Circulation $303,000,000 

Greenback  Circulation 3r)G.000.O00 

Fractional  Circulation 31 .000,000 

Interest-bearing  Legal  Tenders 72.0IH),(IOO 

Total $762,000,000 


16 

Now,  let  us  look  at  the  resources  of  the  Government  and  the 
banks,  which  can  be  applied  to  the  retirement  of  such  portion  of 
the  foregoing  aggregate  as  ex})erience  shall  hereafter  show  is  not 
required  on  the  basis  of  resumption. 

Let  u§  first  take  the  Government,  as  being  the  largest,  and  by 
far  the  most  impoi-tant  debtor,  and  the  one  which,  in  fact,  must 
shoulder  the  main  portion  of  the  load  of  resumption. 

AVe  bei2:in  l^v  assumino-  that  Mr.  McCulloch  must  be  allowed 
to  pay  the  interest-bearing  legal  tenders  ($72,000,000)  either  by 
money  in  hand,  or  by  conversion  into  the  pennanent  loan.  This 
is  what  he  is  desirous  of  doing,  and  what  he  was  doing,  when 
Congress  forbid  the  process.  During  the  last  ten  months  of  1867, 
he  retired  over  $70,000,000  of  these  obligations  without  lowering 
the  value  of  coin,  and  without  reducing  the  bank  loans  a  dollar, 
thus  demonstrating  the  ease  with  which  it  was  done.  It  is  a  fair 
presumption  he  can  retire  the  balance  with  as  little  difiiculty. 

Taking  for  granted  that  the  Government  is  not  to  be  run  for 
specie  on  its  ten  cent  and  twenty-five  cent  notes,  and  that  their 
final  redemption  is  to  be  a  slow  process,  we  set  aside  this  branch 
of  its  obligations  as  requiring  no  especial  protection.  What  the 
Government  must  provide  for,  and  be  prepared  to  redeem  as  fast 
as  presented,  is  its  $356,000,000  of  greenbacks  ;  and  when  it  de- 
monstrates to  all  the  world  its  ability  to  do  this,  resumption  will 
have  become  an  accomplished  fact. 

At  this  point,  it  seems  to  become  necessary  to  enter  upon  the 
much  mooted  point  of  how  much  circulation  the  business  of  the 
country  now  requires,  in  order  to  decide  how  much  the  Govern- 
ment would  be  likely  to  have  to  redeem  of  tliis  existing  stock  of 
$356,000,000  notes  now  outstanding.  But  we  do  not  propose  to 
enter  upon  this  debatable  ground.  We  only  aim  to  show  that 
whether  the  sum  be  more  or  less,  the  Government  can  maintain, 
without  difficulty,  an  impregnable  front  against  both  the  natural 
and  unnatural  demand  of  trade  and  speculation. 

Of  this  $356,000,000,  near  one-third  of  it  (say  $100,000,000)  is 
held  by  the  banks  as  a  reserve  for  the  redemption  of  their  own 
notes.  This  reserve,  we  may  conclude,  would  only  gradually 
disappear  in  the  event  of  resumption,  and  would  be  long  in  de- 
clining to  $50,000,000. 

At  least   another   $100,000,000,  we  think   none  can  doubt, 


IT 

would  be  iiiiiiHivalily  fi.\c<l  in  Uii>iii('>>  cIihiiik'Is,  for  a  loufi;  period 
to  come.  Tliis  would  reduce  the  really  mobile  mass  of  fjreen- 
baeks  to  $200,000,000,  more  or  less,  which  if  i-cpresented  by 
available  resources  in  the  Treasury  to  that  amount,  could  not 
fail  to  trive  the  Government  the  control  of  the  situation. 

The  Governiiu'iit  would  thou  be  enabled  to  declare  its  readi- 
ness to.  resume  sj)ecie  ])ayments  tlie  nu>ment  it  had  funded  its 
remaiinui;  interest -bearinp;  leijal  tenders,  and  converted  its  T-So's 
into  the  permanent  loan,  now  so  nearly  accomplished. 

This,  we  may  easily  perceive,  is  to  impose  a  comjiaratively 
liirht  task  on  the  (rovernraent.  It  has  onlv  to  increase  its 
reserves  to  S20<),(>00,(i00,  and  fund  the  remainino;  $70,000,000 
interest-bearino;  legal  tendei-s.  Of  this  $200,000,000,  it  has  lono- 
lield  in  its  vaults  about  $100,000,000  of  coin,  saying  nothing  of 
its  currency  balance,  of  which  we  will  make  no  account. 

This  is  but  a  trivial  sum,  surely,  for  the  Government  to  raise 
for  this  all-important  object.  It  shows  how  near  we  are  to  the 
point  of  issue  from  all  our  dithculties,  if  we  would  but  seize  the 
advantages  the  situation  affords.  This  $100,000,000  which  our 
circumstances  recpiire — and,  if  the  views  of  many  others  are  cor- 
rect, much  more  than  we  shall  need — can  be  most  easily  obtained 
bv  establishing  a  fonMgn  credit  to  that  amount,  a  foreign  balance 
beinu;  just  as  effect ual  for  resumittion  as  an  importation  of  coin, 
and,  having,  besides,  this  great  advantage  over  an  importation  <»f 
specie,  that  just  so  much  of  it  can  be  used  as  is  wanted,  and  no 
more.  We  thus  incur  no  unnecessaiy  cost,  and  introduce  no 
new  disturbing  element  in  our  finances. 

The  ability  of  the  Government  then  to  resume  would  appear 
to  admit  of  no  doubt  whatever.  The  precise  period  when  it  may 
exercise  that  ability  depends  on  itself.  To  get  ready,  it  has  only 
to  fund  its  7-30's  and  retire  its  interestd)earing  legal  tendei-s. 
Tliis  mav  be  done  in  a  short  or  long  ]H'riod,  just  according  to  its 
own  o])tion.  Ihit  while  its  regular  .^-'iO  loan  is  worth  from  5  to 
1(>  per  cent,  aboxc  pai',  there  is  no  room  for  tpiestiijuing  the  tact 
that  it  can.  at  pleasure,  exchange  demand  notes,  or  greenbacks, 
into  that  loan,  to  whatever  extent  it  chooses,  and  whenever  it 
chooses. 

Now,  let  us  tui-n  to  the  banks,  ami  see  what   i>  in   their  power 

to  follow  the  Government. 
2 


18 

They  have  a  circulation  of  $300,000,000  in  round  numbers. 
They  hokl  $100,000,000  active  lejjal  tender,  $50,000,000  of  in- 
terest-bearino-  legal  tenders,  and  $10,000,000  of  specie.  As- 
suming they  can  carry  $200,000,000  of  circulation  on  a  l^asis  of 
$40,000,000  or  $50,000,000  of  coin,  or  its  equivalent,  which  they  did 
before  the  Avar,  they  would  not  find  it  necessary  even  to  strengthen 
their  existing  reserve  to  protect  their  present  circulation. 

But  suppose  our  presumptions  too  liberal,  and  that  the  joint 
paper  circulation  of  the  banks  and  the  Government  could  not  be 
maintained,  each  with  an  excess  over  its  reserve  of  $150,000,000, 
as  we  have  calculated,  what  are  the  resources  of  each  for  a  still 
further  reduction  ?  The  Government  still  has  its  power  of  fund- 
ing, which  it  may  exercise  almost  at  its  pleasure.  But  how  with 
the  banks  ?  Can  they  hereafter  strengthen  themselves  to  the  ne- 
cessarv  deo-ree  without  sucli  a  contraction  of  their  loans  as  to 
bring  distress  and  bankruptcy  to  their  debtors?  It  is  at  this 
point  that  we  come  to  a  most  encouraging  view  of  the  financial 
situation.  An  abstract  of  the  last  annual  returns  of  the  banks 
(January,  18B8)  shows  the  following  results :  Capital,  $420,000,000 ; 
loans,  $1,055,000,000.  Four-tenths  of  this  aggregate  were,  how- 
ever, in  Government  securities,  and  but  six-tenths  loaned  to  in- 
dividuals. Thus  :  Loans  to  individuals,  $035,000,000 ;  U.  S. 
securities,  $420,000,000.     Total,  $1,055,000,000. 

These  figures  disclose  the  important  fiict  that,  if  the  banks 
find  it  necessary  to  curtail  their  loans  in  order  to  resume,  they 
need  not  make  the  curtailment  from  the  mercantile. community. 
They  can  realize  from  their  Government  securities.  These  are, 
in  effect,  cash  funds,  on  which  they  can  raise  money  from  private 
capitalists,  and  which  they  can  remit  for  sale,  or  to  obtain  a 
credit  abroad.  This  is  a  resource  which  our  banks  have  never, 
on  any  previous  occasion  of  pressure,  enjoyed,  and  it  is  a  circum- 
stance which  modifies  the  situation  entirely.  The  fact  may  very 
properly  relieve  any  apprehension  that  the  individual  interests 
of  bank-debtors  must  be  sacrificed  to  resumption.  It  also  does 
away  with  the  old  idea  that  the  ability  of  our  banks  to  resume, 
after  a  protracted  suspension,  depends  on  full  crops,  and  a  foreign 
demand  therefor.  This  was  formerly  true,  when  we  produced  no- 
thing but  provisions  and  cotton  that  could  be  remitted  to  li(pndate 
balances,  and  secure  a  return  of  specie.       But  now,  we  are  pro- 


19 

ducers  of  coin,  and  flic  t'al>iicaiiN  i>t'  a  mass  of  national  oblifj^a- 
tionB,  wliieli  coniniaiKl  coin  in  all  tic  Iuiro])ean  mai-kets.  The 
com  I  lined  strength  of  these  two  resources  supersedes  the  necessity 
whicli  formerly  o])presse<l  us,  and  is  am])le  for  our  emer<i;eiieies. 

It'  it  he  ol>jectcd  tliat  all  |ilaii>  nt'  ronnijitioii  involve  further 
contraction  of  the  paper  cii'cidatii»n,  \vc  i'e])lv  tliat  this  ohjection 
loses  its  force,  in  view  of  the  following  con.-iderations  :  In  the 
first  ])lace,  resuni]ition  will  be  followed  by  the  instant  lil)eration 
<»f  all  the  hoarded  coin  in  the  country,  wliich  tlie  Controller  of 
the  Treasury  estimates  at  over  S8()0,(»(M»,()0(»,  and  which  will  im- 
mediately seek  the  channels  of  circulation.  Secondly,  with  re- 
sumption, will  come  the  removal  of  the  restriction  iiix.n  our 
hankiuiT  svsteni,  which  limits  the  banks  to  a  circulation  of 
$80(),0()0,0(H).  When  the  banks  agree  to  redeem  their  notes  in 
coin,  there  will  be  no  ol)jectioii  to  tlieir  indefinite  multiplication 
under  our  existing  system. 

It  will  ])e  observed  that  the  progrannne  here  put  forth  only 
pre-supposes  a  preliminary  redemption  of  $70,000,000  of  the  ex- 
isting $760,000,000  of  bank  and  legal  tender-issues  in  order  to 
reach  resumi)tion.  We  think  the  figures  given  will  satisfy  any 
oiu'  who  examines  the  subject  that  ^ve  do  not  miscalculate  the 
result.  If  the  banks,  as  vet,  ha\e  not  been  ol)liged  to  curtail 
their  acconnnodations  to  their  customers,  but,  on  the  contrary, 
have  been  able  to  increase  their  loans  while  we  have  been  ap- 
]>roaching  resumi)tion,  where  is  the  foundation  of  the  ai)prelien- 
sion  that  we  shall  cut  ofi'  the  ordinary  resources  of  business  men 
bv  this  process?  Look  at  the  tacts.  The  liaid<  loans  to  indi- 
viduals were,  in  April,  1866,  $545,000,000;  in  October,  1867, 
$680,000,000;  in  Janmiry,  1868,  $685,000,oOo.  During  the 
whole  of  "Mr.  McCulloch's  operations,  we  think  so  unjustly 
asjiersed,  the  resources  of  the  borrowing  connnunity  have  not 
oidv  been  curtaile(l.  l)ut  they  haxc  been  enlarged.  The  banks 
are  to-dav  loaning  more  than  ever  before,  and  the  rate  of  inter- 
est is  below  the  average. 

Let  us  recapitulate  this  ex])osition  in  figures: 

The  Bank  ciiculiition  is !j;:500,n00.000 

(ireonl.aoks :r)(i,()0().00(1 

Fractional :il,(l(IO.tKM) 

Intert'st-bcarinor  L,.jr,il  Tenders Ti.OOO.OOO 

Total $:5!).000,0(K) 


20 

The  resources  for  redemption   of  tins  sum  of  $759,000,000, 

now  in  hand,  are  as  follows : 

The  Government  holds — 

In  Specie $100,000,000 

In  Currency 80,000,000— $130,000,000 

The  Banks  hold- 
In  Specie $18,000,000 

Currency Ki.OOO.OOO 

Legal  Tenders 180,000,000— $314,000,000 

Total $344,000,000 

Suppose,  now,  the  Government  opens  a  foreign  credit  of 
$100,000,000,  and  is  allowed  to  fund  its  $72,000,000  of  interest- 
bearing  legal  tenders?  We  should  then  reduce  the  foregoing 
paper  issues  to  $677,000,000,  and  it  would  raise  the  reserve  to 
$444,000,000. 

Can  anybody,  even  the  most  cautious,  doubt  the  strength  of 
this  position,  or  doubt  the  ability  of  the  Government  to  assume 
it,  and  to  give  the  country  resumption,  and  with  it  stability  and 
the  basis  of  a  solid  prosperity,  by  the  month  of  January,  1869  ? 

The  banks  and  the  country  have  been  girding  up  their  strength, 
and  consolidating  their  resources  for  more  than  a  year,  in  view 
of  Mr.  McCulloch's  policy  of  resumption.  We  show  that  the 
position  of  both  the  Government  and  the  banks  at  tliis  moment 
is  strong,  and  that  they  have  the  means  to  move  directly  forward 
to  this  consummation.  To  falter  at  this  point  is  to  throw  away 
all  we  have  gained,  and  launch  the  country  on  a  more  uncertain 
future  than  ever,  again  to  struggle,  and  to  suffer  in  renewed 
efforts  to  restore  its  lost  prosperity. 


CHAPTER  YTT. 


THE    NEW    FUNDING   BILL    OF    MR.    SHERMAN. — ITS    REFUNDATORY 

FEATURES    CONDEMNED. 

The  objections  to  Mr.  Sherman's  New  Funding  Bill  are 
radical ;  and  they  blow  upon  it  from  exactly  opposite  points  of 
the  compass.  They  come  on  one  side  from  those  who  would  not 
have  even  a  breath  of  suspicion  stain  the  national  credit,  and  on 


21 

the  other  from  those  who  will  he  contented  ^ith  no  Ijill  tliat 
does  not  meet  the  demand  for  municipal  taxation  upon  tlie 
honds. 

The  hill,  as  it  stands,  nominally  proposes  that  the  holders  of 
the  5-20s  shall  exchange  tlu-iii,  at  their  option,  for  the  new  10-40 
five  per  cents.,  dollar  for  dollar.  But  it  does  not  say  what  is 
uudei-stood  by  the  advocates  of  the  measure.  That  is,  if  the 
holders  of  the  5-20  honds  decline  the  exchange,  they  are  to  be 
paid  otf  in  greenbacks.  Without  this  meaning  attaches,  the  bill 
really  has  no  signiticance  whatever.  For  what  is  the  use  of  en- 
acting that  the  hoklers  of  5-20  six  per  cent,  bonds,  worth  in  the 
market  llO  to  112,  may,  "  at  their  option,"  exchange  them  for 
10-40  five  per  cent,  bonds,  worth  1(»2  to  104.  Of  course,  the 
holders  will  do  no  such  thing  voluntarily.  The  plan  of  the 
funding  scheme,  therefore,  is  to  threaten  the  bondholder  with  pay 
in  greenbacks,  y;entlv  in  terms,  l)ut  none  the  less  reallv  hi  fact, 
in  order  to  induce  them  "  at  their  option,"  to  exchange  their  6 
per  cents,  for  5  per  cents.  ^  ow,  to  this  suggestion  of  partial  re- 
pudiation, those  who  entertain  a  just  sense  of  financial  integrity 
will  not  hearken  for  a  moment :  and  there  are  such  even  in  Con- 
gress. They  are  fortified  by  yet  another  class,  who  are  wise 
enough  to  know  that  honesty  is  the  best  policy,  who  believe  that 
the  cheapest  and  easiest  way  to  carry  our  debt,  is  to  raise  no 
question  about  paying  either  principal  or  interest,  but  to  go  right 
oil  in  the  straight,  narrow  path,  and  discharge  every  obligation, 
actual  and  ini])lied,  according  to  the  highest  tests  of  mercantile 
honor.  Those  who  entertain  these  views  will  oi)})Ose  Mr.  Sher- 
man's i)ill.  and  every  other  l)ill  which  looks  to  varying  one  iota 
from  the  s})irit  of  the  contract  under  which  the  bonds  were  issued. 

But  we  are  constrained  to  confess  that  the  greatest  strength 
of  opposition  which  Mr.  Sherman's  bill  is  likely  to  encounter,  will 
be  from  the  class  which  it  is  iVametl  to  conciliate.  It  will  be 
most  strongly  resisted  by  those  who  hold  that,  instead  of  its  re])U- 
diating  too  much,  it  repudiates  too  little.  The  great  crowd  want 
to  get  at  the  bonds  to  tax  them,  as  all  other  property  is  taxecl  in 
this  country — 2,  8,  or  4  per  cent.  Others  desire  to  force  the  in- 
terest down  to  •">.}  or  4  per  cent.,  and  yet  others  are  anxious  to  pay 
them  otf  in  a  fresh  issue  of  jiaper  money. 

In   undertaking  to   navigate  his  bill  past  these  variously  be- 


22 

setting  ol>stvuctions,  Mr.  Shcriuan  has  a  task  which  will  try  all 
his  skill,  his  patience,  and  his  good  nature.  And  we  do  not  see 
how  he  is  to  succeed.  And  if  he  succeeds  we  cannot  see  that  he 
settles  the  great  agitating  and  disturbing  element  upon  which  the 
national  bonds  are  to  be  more  and  more,  every  year,  tossed  about ; 
and  this  is  the  question  of  municipal  taxation.  Let  Mr,  Sher- 
man pass  his  bill,  and  establish  the  rate  of  Government  interest 
at  5  per  cent.,  and  the  same  jealousy,  the  same  hostility  toward 
imtaxed  bondholders,  will  still  exist  in  every  city  and  village  of 
the  country.  And  it  is  an  uneasiness  which  will  not  be  cured 
while  the  loan  endures. 

What  good  sense  demands  is,  that  all  the  questions  arising 
out  of  this  whole  business  should  be  finally  settled;  We  want  a 
policy  which  shall  meet  this  demand.  We  hold  that  the  existing 
situation  of  the  national  loan  is  just  as  good  as  it  need  be  for 
this  purpose.  The  5-20s  are  rapidly  maturing.  What  we  have 
need  to  do  is  to  pay  them  off  just  as  fast  as  we  can  negotiate  new 
loans,  subject  to  the  same  taxation  as  all  other  personal  property. 
But  in  order  to  do  this  to  the  best  advantage  as  to  rate,  and  to 
dispose  of  every  question  in  regard  to  what  our  bonds  ought  to 
be  paid  in,  as  well  as  all  others,  we  must  first  resume  specie  pay- 
ments. Our  way  then  will  be  perfectly  clear.  All  our  tricks 
and  contrivances  will  avail  us  nothing  in  escaping  from  the  de- 
mand which  this  one  great  over-shadowing  necessity  imposes. 
It  is  plain  sailing  toward  this  end.  The  sea  may  be  rough  and 
the  winds  strong,  but  the  waters  are  deep  and  broad,  and,  once 
round  the  Cape,  we  shall  aiichor  and  rest  securely  in  our  great 
financial  Pacific.  Everything  short  of  this  is  but  a  makeshift  to 
avoid  the  inevitable.  It  is  running  from  one  shallow  to  ground 
on  another ;  it  is  to  dodge  from  one  obstacle  to  be  confronted  by 
a  series  in  endless  succession.  It  is  said  there  is  no  royal  road  to 
learning ;  there  is  certainly  none  to  paying  debts.  It  is  an 
earnest,  serious,  self-denying  task ;  and  it  is  a  task  which  every 
man,  even  short  as  human  life  is,  finds  his  account  in  cheerfully 
embracing  when  the  necessity  is  upon  him.  How  much  more 
important  than  a  nation — whose  hold  on  existence  is  thr<jugh 
the  ages,  whose  financial  honor  is  a  necessity  of  its  growth  and 
power ;  nay,  whose  very  existence  may  in  some  unexpected 
emergency  depend  upon  it — should  preserve  that  honor  unspotted 


23 

and  untarnished  !  Let  the  nation,  then,  rise  to  a  full  conception 
of  the  demand  now  made  uj)on  its  financial  integrity,  its  as  yet 
unstained  honor,  and  declare  that  it  will  make  the  small  sacrifice 
requisite  to  restore  its  credit  and  position  to  a  level  \\  itli  the 
other  great  nations  of  the  world.  Let  us  not  stand  dawdling 
over  this  miserable  business  of  shaving  our  own  notes,  and  striv- 
ing to  skin  the  holders  by  exciting  their  distrust  and  apprehen- 
sion. It  is  a  mean  business,  a  dirty  business,  unworthy  the 
spokesmen  of  a  great  nation,  and  it  will  be  destitute  of  reward, 
for  it  will  be  a  losiuii  business. 


CHAPTER  YIII. 

GREENBACKS    VERSUS   BANK   NOTES. THE    PLAN    OF    SUBSTITUTION 

WILL    NOT    WORK. REASONS   WHY. 

The  practical  sense  of  commercial  and  financial  circles  all 
over  the  world,  through  many  centuries,  has  decided  that  banks 
are  essential  to  the  public  convenience,  and  are  even  a  public 
necessity.  But  banks  must  be  invested  with  the  ])ower  of  issuing 
their  own  notes,  in  order  to  keep  them  in  profitable  operation. 
It  is  not  likely  that  this  long  established  conviction  is  going  to 
suddeidy  give  place  to  anybody's  crude  or  ingenious  theory  of  a 
better  plan  to  secure  similar  results.  And  thus  the  long 
threatened  scheme  of  substituting  greenbacks  for  the  existing 
bank  note  circulation  which  still  agitates  Congress,  and  was  the 
theme  of  an  elaborate  argument  of  Gen.  Butler  at  the  opening 
of  the  session,  must  fall  to  the  o-round. 

The  scheme  is  broached  as  though  it  would  be  about  as  easy 
to  overset  1,600  l)anks  doing  business  all  over  the  country,  with 
their  endless  and  intricate  business  ramifications,  as  it  would  to 
slide  so  many  bricks  out  of  the  tail  of  a  cart.  A  pure  bullion ist, 
if  such  is  to  be  found,  need  not  object  to  such  a  policy  if  it 
were  capable  of  accomplishment  (except  for  its  folly)  with  the 
system  of  mutual  exchangeability  established  as  proposed,  to 
wit :  the  greenback  to  be  always  redeemable  at  the  Treasury  in 
coin-bearing  bonds,  and,  vice  vefsa,  the  greenback  always  obtain- 


24: 

able  for  the  same  bonds.  It  is  tlie  pleasing-  conception  of  tlie 
advocates  of  the  plan  that  this  exchangeability  feature  would 
always  relieve  the  circulation  of  any  [)lethora  which  might  at 
any  time  exist ;  and,  what  is  of  even  greater  consequence,  would 
always  secure  the  country  against  the  scarcity  of  the  circulating 
medium.  The  first  part  of  the  conception  might  be  realized.  It 
woidd  be  in  the  natural  course  of  tilings  to  run  home  a  redundant 
circidation,  and  receive  specie-earning  bonds  in  lieu  of  it.  But 
the  redundancy  having  disappeared  by  this  process,  and  the  cur- 
rency, it  might  be,  made  scarce  in  this  way,  it  could  never  be 
rendered  what  would  be  called  plentiful  again,  by  a  process 
which  looks  entirely  to  the  exchange  of  invested  capital,  like  that 
of  Government  Securities,  drawing  six  per  cent,  interest,  or  even 
five  per  cent,  in  specie,  for  money.  For  this  reason :  the  moment 
the  value  of  our  consolidated  debt  rose  to  par,  in  coin,  which 
M^ould  be  very  soon  after  our  credit  is  fully  reestablished,  our 
circulation  would  be  on  a  specie  basis  ;  and  when  our  bonds 
became  thus  valuable,  there  would  be  no  more  object  in  exchang- 
ing them  for  greenbacks  than  for  coin.  The  circulation  would 
conform  itself  to  that  state  of  things,  and  so  become  as  infiexible 
as  a  coin  circulation  itself.  When  the  rate  of  interest  fell  below 
the  rate  borne  by  the  bonds,  as  it  sometimes  would,  we  should 
then  experience  even  a  worse  state  of  things  than  though  we  had 
a  specie  circulation  only.  For  the  greenbacks  would  be  returned 
to  the  Treasury  till  they  became  scarcer  than  coin.  The  upshot 
would  be  that  we  should  thus  find  ourselves  supporting  an  arti- 
fical  paper  currency  bearing  a  premium  in  specie.  Of  course  it 
would  then,  during  this  period  of  appreciation,  no  longer  be  used 
as  a  circulating  medium,  and  hard  money  would  take  its  place. 
Is  it  worth  while  to  institute  a  paper  money  machinery  that  would 
produce  so  absurd  a  result  as  tliis?  But  thus  it  is,  and  necessarily 
must  be,  with  all  schemes  to  sup])ort  the  uniform  standard  of 
value  established  throughout  the  commercial  world,  with  a  view 
to  found  a  better  system.  We  may  invent,  and  devise,  and  try 
to  circumvent  the  natural  laws  on  this  subject  to  the  end  of 
time,  and  we  shall  end  just  wliere  we  began.  There  can  be  but 
one  universal  standard  of  value,  and  the  attempt  to  substitute 
anything  else  for  it  will  inevitably  fail ;  legislate  how  you  will, 
contrive  how  you  will,  this  standard  thrusts  itself  among  all  your 


25 

contrivances,  in  season  ;iii<l  out  of  season;  and,  wlietlier  you  will 
or  no,  re<i'ulat('s  and  nieasiires  evui'v  coiiinici-cial  and  financial 
transaction.  In  spite  of  cvcrv  cflort,  in  defiance  of  every  law  to 
prevent  it,  thei-e  will  he  lor  every  coninio(lity  of  trade,  and  to 
every  tinancial  en>;a<2;enient,  an  actual,  positive,  and  irresistible 
specie  value.  Pile  legislative  enactnieiits  mountain  liiiili.  sayinir 
there  shall  not  he,  and  it  w  ill  he  all  the  same. 

We  wish  to  make  one  other  ohservation  on  this  Congressional 
})roject  to  dis})ense  with  the  hanks  and  substitute  the  notes  of  the 
Government  for  hank  hills. 

The  men  who  want  to  borrow  money  are  never  the  men  who 
have  their  ])ockets  tilled  with  United  States  bonds.  The  nioiiey- 
boi'rowers  are  the  merchants,  the  manufacturers,  the  producers, 
whose  capital  is  invested  in  tlu'ir  business.  The  only  securities 
which  they  have  to  offer  are  their  own  notes,  the  notes  of  their 
debtors,  their  domestic  or  foreign  exchange.  These  may  be  all 
of  the  very  first  class,  such  as  any  bank  or  bankei'  would  be  glad 
to  get  ;  but  they  would  be  no  better  than  so  much  waste  jjaper 
when  offered  to  the  Treasury.  Even  a  rich  mairs  notes  might 
jjo  to  protest  everv  dav  in  the  vear,  if  he  had  no  resource  hut  the 
Treasury,  operating  on  the  basis  of  this  exchangeability  feature. 

It  is  strano-e  that  these  iniienious  theorists  overlook  such 
palpable  considerations  as  these. 

What  trade  and  commerce  need  are  agencies  which  w  ill  take 
the  notes  of  men  of  business,  and  y;ive  monev  for  them.  That  is 
the  comnioditv  thev  have  to  offer  in  exchan<>'e  for  monev;  they 
have  nothing  else.  How  idle  to  say  to  them,  hiing  along  Gov- 
ernment bonds  and  we  will  furnish  vou  all  the  monev  vou  retiuire. 
The  merchant  might  just  as  well  be  asked  to  furnish  Itullion  (tr 
gold  coin  as  security  for  the  money  he  Mants  to  lH)rrtiw.  The 
security  demanded  is  what  he  does  not  deal  in.  The  re(piire- 
nient  is  ecpiivalent  to  insisting  that  a  man  shall  be  a  capitalist 
before  he  becomes  a  merchant. 

With  the  banks  deniolislu'(l,  the  moiiey-hoi'rower  would  find 
himself  without  any  more  ability  to  borrow  than  if  wi-  had  only 
a  currency  of  ii'old  and  silver.  The  fn'eenback.  under  anv  svstem 
of  redemj>tion,  would  become  just  as  uiu'lastic  as  coin. 

It  is  the  one  irreat  and  useful  funetitui  of  the  hank,  that  it 
plants  itself  in  e\-ery  little  mart  <>f  tratle,  and  offers  its  money  to 


26 

everybody  who  lias  a  y;o^)d  note  or  draft  to  sell.  And  as  these 
notes  and  drafts  are  daily  maturing,  it  can  every  day  take  new 
ones.  In  this  way  the  money-circulation  of  the  country  furnished 
l>y  the  1  tanks  is  elastic  and  llexiblo,  and  responds  exactly  to  the 
wants  of  business  when  it  is  in  a  natural  and  healthy  state.  The 
Treasury  note  can  never  act  as  a  substitute  for  the  bank-bill,  in 
ordinary  times,  unless  the  Treasury  turns  banker,  and  sells  its 
greenbacks  for  the  same  kind  of  securities  that  the  bank  takes 
for  its  bank  notes.  Nobody  will  pretend  that  this  would  be 
either  wise  or  proper,  or  profitable.  And  thus  we  see  how  in- 
adecpiate  for  the  needs  of  a  great  trading  community  is  the  pro- 
})osed  machinery  of  a  greenback  circulation,  as  a  substitute  for 
that  of  the  banks,  with  its  ever-varying  quantity  and  perpetually- 
renewed  supply,  through  the  natural  operation  of  daily  business 
transactions. 


CHAPTER  IX. 

PRESENT    DEPRESSION    EST    TRADE    NOT  TO  BE  CURED   BY   LEGISLATION. 
SELF-LIMITED    CHARACTER    OF    ALL    LEGISLATIVE    PANACEAS. 

We  have  already  ex])ressed  the  sentiment  that  the  existing 
depression  in  trading  and  industrial  circles  has  little  or  nothing 
to  do  with  the  state  of  the  circulating  medium.  There  is  more 
i>t  it  afloat  than  is  usual  in  ordinary  times  by  a  great  deal,  the 
aggregate  being  over  $750,000,000.  There  is  money  enough  to 
be  had  on  good  security  in  all  the  great  centers,  and  whatever 
may  Ije  alleged  to  the  contrary,  it  is  substantially  true  that  when 
money  is  plenty  at  the  centers  it  is  plenty  at  the  extremities  on 
all  adetjuate  securities.  Six  per  cent.  Government  obligations 
are  everywhere  10  per  cent,  above  par.  And  where  money  can- 
not be  had  it  is  because  the  security  is  unsatisfactory. 

The  present  depressed  state  of  trade  and  industry  requires 
something  very  different  from  an  increase  of  paper  money,  or, 
indeed,  any  acts  of  legislation,  to  relieve  it. 

Of  course,  so  far  as  legislation  has  imposed  burdens  on  trade 


27 

and  industrv  by  taxation,  legislation  is  ahic  to  relieve  them  ])y 
taking  it  oti'.  So,  too,  in  certain  national  conditions,  legislation 
can  revive  and  stimulate  industry,  and  give  a  great  iillip  to  trade 
and  enterprise.  But  these  conditions  are  excei)tional  and  canncjt 
be  created  at  will.  They  are  evoUi-d  slowly,  only  by  time  and 
circumstance.  This  is  a  consideiatidii  (piite  too  generally  over- 
looked. The  idea  that  because  legislation  can  sometimes  take 
the  initiative  in  ])romoting  industrial  prosi)erity,  it  can  always 
do  so,  is  a  grave  error.  Legislation  is  not  a  constant  force  which 
can  always  be  used  in  this  direction.  It  has  its  times  and  seasons 
when  it  can  act  efficiently.  But  this  power  is  limited  to  peculiar 
and  exceptional  emergencies  and  conditions.  It  may  be  said  to 
be  a  regulator  and  stimulant,  rather  than  a  constant  motive 
power.  It  exhausts  itself,  too,  by  its  own  action.  This  law 
of  limitation  shonld  never  be  overlooked  when  Icirif^lative  action 
is  suggested  as  a  relief  to  a  depressed  or  exhausted  condition.  A 
nation  may  enact  a  high  pn^tective  taritf  at  an  oj)])ortune  period. 
This  act  may  ditiuse  sudden  and  great  prosperity.  Such  an  ex- 
j)erience  has  occurred  more  than  once  in  our  own  history.  But 
this  very  stimulus  may  temporarily  lead  to  over  action.  Dull- 
ness of  trade,  stagnation  of  business,  depression  of  prices,  low 
wages,  and  deficient  employment  may  ensue.  All  these  may  be 
the  contingent,  incidental,  tem})orary  evils  of  a  mainly  beneficent 
act  of  legislation.  But  they  are  not  to  be  cured  by  more  legisla- 
tion of  the  same  sort.  Their  cure  nmst  l>e  left  to  other  agencies 
— to  time,  to  rest  from  undue  exertion,  to  the  gradual  absorption 
by  consumption  of  surplus  goods  which  a  too  ardent  competition 
has  produced.  In  a  word,  the  trade  and  industry  of  nations  must 
ill  the  main  rectif'v  their  uniuitural  oscillations  throuii-h  the  in- 
fiuence  of  natural  causes.  They  are  for  the  most  part  beyond 
the  reach  of  legislative  i)anaceas.  Especially  is  this  the  case 
when  legislation  itself  has  caused  or  aggravated  those  excesses. 
When  })rt)duction,  from  the  encouragement  of  the  State,  has  be- 
come plethoric  in  any  depai'tment,  the  only  possible  relief  must 
come  from  ctmsumption.  (Tovciiinicnt  mav  wisely  adjust  its 
measures  so  as  to  create  and  nuiiutain  a  just  and  useful  ecpiili- 
Itriuni  between  the  two  classes  t»f  ])roducer>  and  t-onsumers,  but 
the  inevituhlt'  disorders  which  ai'JM'  tVoin  the  varicil  complica- 
tions  which    belong  to  tlu'   [troduction    and    consumption   of  a 


28 

diversified  industry,  and  which  inhere  in  tliese  relations,  are  not 
just  subjects  of  legislative  interference,  for  such  action  would  be 
fruitless. 

Trade  and  l)usiness  in  all  active  communities  have  their  ebbs 
and  fiows  like  the  tide.  After  rising  unusually  high,  they  recede 
unusually  low.  There  is  no  form  of  legislation  that  is  competent 
to  deal  with  these  excesses.  They  are  quite  outside  of  its  do- 
main ;  beyond  the  reach  of  its  iniiuence.  The  great  and  com- 
mon mistake  of  people  is  the  belief  that  they  are  capable  of 
rectification  by  legislative  action.  People  will  believe  that  when 
a  nation's  aifairs  are  out  of  joint,  its  legislators  should  be  com- 
])etent  to  srt  th(mi  right.  But  the  industrial  body,  like  the 
natural  body,  is  atfiicted  by  disorders  which  are  known  to  the 
doctors  as  "self-limited,"  and  which  are  best  cured  by  letting 
them  alone.  They  atfiict  while  they  last,  but  they  defy  the  skill 
of  the  physician,  who  merely  watches  while  they  exhaust  them- 
selves. 

Now,  let  it  be  borne  in  mind,  that  never  in  the  whole  past 
history  of  this  nation  has  its  ti-ade,  its  industry,  its  finances,  been 
in  such  an  artificial  condition  as  now.  They  have  become  so  in 
consequence  of  a  great  and  destructive  war,  and  the  legislation 
resulting  therefrom.  We  will  assume  that  that  legislation  was 
necessary.  But  if  good  came  of  it  in  the  first  instance,  evil  has 
followed.  The  circumstances  which  demanded,  or,  at  least,  ex- 
cused this  legislation,  no  longer  exist. 

Now  we  are  confronted  with  the  question  whether  or  no  we 
are  in  that  peculiar  and  exceptional  condition,  brought  about  by 
time  and  circumstance,  which  can  be  improved  by  legislative  ac- 
tion ?  Or  whetlier  we  are  not,  on  the  contrary,  in  a  state  where 
legislation  has  exhausted  itself;  and  where  our  remedy  is  to  be 
found  only  in  the  operation  of  natural  causes ;  through  the  lapse 
of  time,  of  ])atient  industry,  of  economy,  and  the  self-adjustment 
of  the  relati(Mis  of  production  and  consumption  so  long  disturbed 
by  the  violent  agitations  of  war. 

We  entertain  no  doul)t  on  the  subject.  We  hold  that  it  is 
plain  to  be  seen  of  all  men  that  our  present  unnatural  condition 
is  the  result  of  exceptional  events,  aggravated  by  legislative  ac- 
tion, Le<2:islation  overthrew  our  lonfi:-established  standard  of 
value  by  creating  a  paper  legal  tender.     Legislation  filled  the 


29 

country  with  irredeomahle  paper  money.  These  two  BtiniuLints 
have  done  tlieir  work.  They  have  done  all  of  fiood  tliat  could 
be  done  in  this  direction.  We  iimst  now  escajtc  tVoiii  the  exist- 
infj  evils  which  have  followed  l»y  imdoino-  ratlici-  tliaii  I>v  doiiiir. 
War  demanded  agencies  which  peace  does  not  r('(|iiire.  1'lie 
Government  needed  helps  then  which  it  docs  n(»t  need  now.  Its 
efforts  should  thus  consist  in  dis])ensin<;  with  the  machinery  then 
set  in  motion.  They  are,  first,  the  leo:al  tender  act,  and,  second, 
the  irredeemal)le  paper  money.  Just  to  that  extent  it  can  dis- 
pense with  these  agencies;  just  to  that  extent  it  is  in  duty  l»ouiid 
to  dispense  with  them.  And  in  this  matter  it  should  consult  its 
own  power  and  its  own  convenience.  It  created  tliciii  for  its 
own  benefit ;  it  is  its  clear  right  to  abolish  them  when  it  requires 
them  no  longer.  And  we  may  add,  the  trading  and  producing 
classes  have  no  right  to  demand  the  prolonged  use  of  these 
means  for  their  profit  and  convenience  ;  especially  when  the  de- 
mand is  made,  as  we  lia\e  heretofore  ^hown,  at  the  exjoense  of 
the  consumer  and  of  the  labor  of  the  country,  even  if  their  use 
coul(J  be  continued  without  danger. 

It  is  thus  we  come  to  the  conclusion  tliat  the  condition  of  the 
country  cannot  be  improved  by  furtlici-  artifices  of  legislation. 
We  hold  them  to  be  exhausted  for  good  in  that  particular  respect 
wherein  we  need  relief.  We  must  now  fall  back  on  the  recuper- 
ative powers  of  the  nation — on  the  solid  wealth,  on  the  industry, 
on  the  enterprise  and  resolution  of  the  country.  These  are  suf- 
ficient for  our  wants.  Notwithstanding  all  the  complaints  that 
are  heard,  our  actual  industrial  condition  is  better  than  that  of 
any  other  nation.  A  large  proportion  of  our  business  interests 
are  soimd  and  strong.  The  great  leading  articles  of  agricultural 
production,  which  represent  such  vast  interests,  bear  high  prices. 
The  avenues  of  transportation,  our  canals  and  railroads,  another 
immense  interest,  are  all  most  ])rofitablv  eno:;ao;e(l.  Manv 
branches  of  manufacture  are  still  employed  at  remunerative 
rates.  Others  are  reviving  from  their  depression.  And  if  some 
branches  are,  or  have  been  losing,  it  must  be  remembered  they 
are  the  particular  ones  which  made  so  iinu-h  money  durin^i;  the 
war — the  obvious  cause  of  their  present  situation  being  a  natural, 
and  we  may  even  say  healthy,  reaction  from  a  former  state  of 
unnatural  activity  and  profit.      It  is  the  recession,  merely,  of  an 


30 

unusually  hio-h  tide  in  their  affairs.  It  is  in  the  natural  order 
that  trade  is  sometimes  dull,  money  sometimes  scarce,  production 
sometimes  unremunerative,  labor  sometimes  partially  employed 
and  poorly  paid.  Tt  is  so  now  all  over  the  world.  It  will  be  so 
at  intervals  while  civilization  endures.  There  are  seasons  of 
health,  and  of  disease  and  suffering  ;  seasons  of  rest,  as  seasons 
of  activity.  This  is  the  law  of  the  commercial  world.  It  is  the 
law  of  all  nature  as  well.  We  can  no  more  cure  this  condition 
l)v  legislation  than  we  can  turn  day  into  night,  or  control  sun- 
shine and  storm  l)y  legislation. 

It  is  in  the  light  of  these  considerations  that  we  must  labor 
to  restore  the  losses  of  the  war,  and  to  reform  our  condition,  and 
to  cure  the  disorders  and  depressions  which  affect  the  general 
prosperity,  and  mark  the  present  transitional  period. 


CHAPTER  X. 

VIEWS  OF  A  MEMBER  OF  THE  FINANCE  COMMITTEE  OF  THE  SENATE 
FROM  MISSOURI. RIGHTS  OF  THE  PUBLIC  CREDITOR. MR.  HEN- 
DERSON   A    SYMPTON  OF    THE  NATIONAL     CONDITION. THE    FUTURE 

OF    OUR   NATIONAL    SECURITIES. 

It  would  be  a  hopeless  task  to  undertake  to  confute  the 
numberless  empirical  schemes  of  members  of  Congress  on  the 
question  of  finance.  But  the  view>  of  the  sever;d  members  of 
the  two  committees  of  the  Senate  and  House  who  have  charge 
of  such  suV)jects,  when  elaborately  set  forth,  seem  to  exact  notice. 

Mr.  Henderson,  of  Missouri,  a  member  of  the  Finance  Com- 
mittee of  the  Senate,  lately  expounded  himself  at  length. 
Whatever  claims  the  Senator  may  have  to  many  excellent 
qualities — claims  we  shall  7iot  questi<m — great  gifts  as  a  financier 
we  cannot  concede  to  him.  In  the  first  place,  his  fundamental 
conceptions  of  the  nature  of  the  pecuniary  obligations  of  a 
government,  as  explained  hy  himself  in  the  following  extract 
from  his  recent  speech,  show  him  to  he  a  man  in  whom  a  high 
sense  of  financial  and  mercantile  lumor  is  totally  wanting.     He 


31 

substantially  fleclares  that  a  promise  to  pay  means  nothinji:  at  all. 
Hear  him  : 

"  Is  it  not  more  reasonable  to  infer  tliat  the  public  creditor,  piirehaBinsr  a 
Government  l)ond,  takes  it  subject  to  the  exercise  by  Congress  of  all  its  consti- 
tutional powers?  It  is  surely  lejritimate  for  Congress,  after  it  contracts  a  debt, 
to  coin  money  and  put  it  in  circulation.  It  is  e(|ually  clear  that  Conprress  may 
repulate,  and  then-fore,  chanjre  its  value.  The  coinage  of  jrold  may  be  double 
or  tiuadrui)le  in  amount,  or  the  use  of  ffold  as  a  medium  of  exchan<re  >nai/  hf 
ahnndoned  altogether  and  something  eUe  adopted.  *  *  *  When  no  sjn-cific 
agreement  is  made,  I  insist  that  both  debtor  and  creditor  are  sui)posed  to  con- 
tract subject  to  all  the  continrrencies  of  future  letrislation.  That  lejrislation 
may  be  such  as  to  make  the  debt  more  or  less  valual)le  at  the  time  of  its 
payment.  This  fact  is  underst(jod  by  both  parties  when  the  contract  is  made, 
and  enters  into  and  forms  a  part  of  it." 

We  contend  tliat  a  man  who  can  talk  in  this  way  in  regard  to 
the  character  and  value  of  the  deliberate  enuagements  of  a  great 
government,  or  a  small,  is  utterly  disqualified  from  sitting  in 
judgment  upon  the  morality  or  honesty  of  financial  transactions. 
There  is  not  a  heresy  or  a  dishonesty  that  ever  was  advocated 
or  practiced  upon  a  pul>lic  creditor  that  is  not  supported  in  the 
doctrines  of  this  extraordinary  extract.  It  is  an  open  and 
unlimited  claim  to  the  right  to  cheat  the  public  creditor  out  of  his 
whole  debt,  if  the  debtor  chooses  to  do  it.  More  than  that,  the 
preposterous  idea  is  here  expressed  that  the  lender  understands  it, 
is  one  of  the  conditions  of  a  public  loan  tliat  the  borrower  is  at 
liberty  thus  to  cheat  him.  The  Government  inav  clip  its  coin, 
may  debase  its  currency,  may  make  an  unlimited  issue  of  irredeem- 
able paper  and  declare  it  legal  tender,  and  pay  off  its  delits  therein. 
Mr,  Henderson  substantially  asserts,  in  the  above  quotation,  that 
all  this  is  understood  by  all  parties  in  every  public  loan. 

He  might  with  equal  reason  deny  the  sanity  of  mankind,  and 
assume  that  capitalists  are  so  eager  to  get  rid  of  their  property 
as  to  seek  opportunities  to  commit  it  to  the  flames.  He  does,  in 
fact,  assume  that  every  man  who  has  money  to  lend  dotes  on 
repudiation  ;  that  he  longs  for  an  opportunity  to  find  a  borrower, 
who  is  so  situated  that  he  is  at  lil)erty  to  deny  i)ayment  of  what 
he  borrows. 

If  Mr.  Henderson's  doctrine  be  correct,  such  are  the  views  of 
every  man  who  buys  a  Government  bon<l.  He  sinqdy  loves  to 
be  ciiined.  Tnless  this  is  the  case  of  the  money-lender,  why  on 
earth  should  he  consent  to  flimr  his  hard-earned  dollai*s  into  the 


32 

lap  of  a  Government  which  is  at  liberty  any  time  to  turn  round 
and  say  it  won't  ]>ay  at  all,  or  will  only  pay  in  worthless  promi- 
ses? But,  as  an  actual  fact,  are  not  all  money-lenders  tempted 
on  all  sides  with  the  best  of  securities,  and  their  private  indebt- 
edness additionally  secured  by  the  most  unbending  legal  enact- 
ments {  Why,  on  earth,  then,  should  a  lender  accept  the  obliga- 
tions of  a  l)orrower  who  is  at  liberty  to  convert  them  into  smoke, 
when  he  can  obtain  securities  as  incond)ustible  as  bricks  and 
mortar,  or  roads  of  iron  ? 

Mr.  Henderson  may  possibly  reply,  that  what  he  said  was  in- 
tended to  be  qualified  by  the  remark  that  a  "specific  agreement" 
might,  or  could,  change  the  conditions  of  a  loan.  Such  a  reply 
does  not  hcl])  him.  In  the  first  place,  the  first  part  of  his  state- 
ment is  wholly  unqualified.  But  let  that  pass.  We  assert,  the 
proposition  that  every  (#rovernment  loan  is  a  "specific  agree- 
ment "  to  pay  a  certain  number  of  "  dollars,"  which  dollar  is  a 
defined  thing,  i)recedent  to  the  contracts,  and  that  what  the 
"  dollar "  is  when  the  loan  is  made  is  the  dollar  that  must  be 
paid.  We  deny  entirely  that  there  is  any  understood  right, 
reservation,  privilege,  or  understanding,  of  any  kind  or  descrip- 
tion, ex])ressed  or  implied,  under  which  Government  may  change 
or  vary  its  terms,  or  even  the  understanding  on  which  the  holders 
took  it,  to  the  amount  of  one  hair's  breadth.  If  Government 
even  stands  by  silently,  and  sees  its  loans  disposed  of  by  agents 
on  terms,  and  with  representations  which  it  knows  to  be  un- 
founded, and  does  not  intend  to  fulfil,  it  is  morally  guilty  of  ob- 
taining money  under  false  pretenses,  and  of  intentional  fraud 
upon  the  purchaser.  But  it  is  more  especially  and  unqualifiedly 
guilty,  if  it  presumes  u])on  its  sovereignty  or  its  legislative  })ower 
to  deprive  its  creditor  of  one  iota  of  the  exact  sum  it  borrowed, 
or  of  any  infinitessimal  fraction  of  the  rate  of  interest  it  agreed 
to  pay,  until  the  loan  is  wholly  re-indmrsed.  Government  has 
not,  in  morals,  or  according  to  the  most  ordinary  tests  of  mercan- 
tile integrity,  the  shadow  of  a  right  to  abridge,  in  the  least  de- 
gree, the  sum  which  the  ])ul)lic  creditor,  in  becoming  a  party  to 
a  national  loan,  contracted  to  receive. 

A  man  who  does  not  see  all  this  with  an  eye  of  fire,  has  no 
claim  to  discuss  the  nature  (»r  treatment  of  pecuniary  obligations, 
whether  of  an  individual  or  of  a  Government.  Between  a  solvent 


33 

debtor  and  his  creditor  there  is  no  middle  ground.  The  contract 
settles  everythino;.  There  is  nothing  to  l?e  left  to  compromise. 
Nothing  can  be  pleaded  in  behall'  of  a  debtor  but  actual  inability. 
Inconvenience  or  loss  is  nothing.  Where  the  ability  exists  the 
pay  must  come.  Solvency,  character,  mercantile  honor,  finan- 
cial integrity,  knows  no  other  law.  This  Government  must  pay 
or  swindle,  or  acknowledge  itself  bankrupt.  It  has  got  to  take 
one  of  these  three  attitudes  l)efore  the  world.  It  cannot  escape. 
The  inexorable  pen  of  history,  the  fixed  judgment  of  mankind, 
await  its  action.  But  Avhile,  as  we  have  said.  Government  has 
no  7'ight  to  clip  its  coin,  to  debase  its  coinage,  to  adulterate  its 
])aper  circulating-medium,  it,  nevertheless,  has  i\\Q  power  to  do  it. 
If  it  chooses  to  play  the  villain,  it  may  cheat  its  creditors,  it  may 
swindle  its  bondholders,  it  may  repudiate  its  contracts,  but,  in  so 
doing,  it  incurs  the  villain's  reputation  and  his  fate.  It  may  say 
it  will  i)ay  three-quarters,  half,  one-quarter,  or  nothing,  of  all  it 
owes ;  but  the  simple  fact  that  it  is  to-day  discussing,  in  Con- 
gress and  out,  which  it  will  do,  is  a  costly  discredit,  and  a  ruin- 
ing reproach  to  the  nation.  To  debate  the  question  of  national 
honesty  is  the  most  expensive  luxury  in  which  Congress  can  in- 
dulge. But  our  circumstances  and  our  habits,  perhaps,  render 
it  unavoidable,  and  we  must  suffer  the  consequences  of  our  in- 
dulgence. 

The  practical  issue  of  all  this  is  the  main  thing  which  interests 
everybody.  But  who  shall  forecast  it  ?  In  our  financial  morals 
we  are  in  the  gristle. 

We  are  not  yet  hardened  up  into  any  fixed  shape.  There  are 
cores  and  centei-s  of  soundness,  but  huge  fringes  and  suburbs, 
and  some  deep  caverns  of  rottenness.  Who  knows  how  we  are 
coming  out  ?  Who  knows  whether  we  shall  ripen  into  a  comely 
and  high-toned  manhood,  worthy  the  great  military  reputation 
the  nation  has  achieved  ?  While  the  credit  of  Massachusetts 
glitters  like  a  diamond  (alas !  that  she  stands  alone),  great,  rich 
Pennsvlvania  once  deliberatelv  damned  hei-self  bv  reiiudiation, 
and,  like  the  fabled  inhabitants  of  hell,  encountered  by  Sweden- 
borg,  forgets  or  does  not  know  it  to-day. 

Our  future  thus  defies  prognostication.  The  keenest  pecuniary 
scent  is  at  fault.     All  that  we  know  certain  is  that  gold  is  at 
140,  and  tends  upward,  and  that  our  six  per  cent,  coin-bearing 
3 


34 

bonds  are  sold  in  Enrope  at  75  cents  on  the  dollar,  with  money 
plentiful  there  at  three  and  four  per  cent.  These  features  of  the 
market  indicate  a  distrust  and  apprehension  of  our  future  on 
both  sides  of  the  Atlantic.  Judging;  from  the  specimens  of 
-financial  views  we  have  been  commenting  on,  and  those  we  have 
seen  expressed,  from  time  to  time,  by  other  representatives  of 
that  Great  Valley  which  claims  empire  over  these  States,  we 
should  say  that  that  distrust  and  apprehension  were  not  ill- 
founded. 

We  regard  Mr.  Henderson  rather  in  the  light  of  a  symptom  of 
the  national  condition.      Nevertheless,  he  is  the  spokesman  of 
multitudes,  even  more  financially  oozy  than  himself.     He  is  a 
sort  of  barometer  of  geographical  opinions.     His  is  the  prairie 
standard  of  national  credit,  probably  in  its  highest  form.     The 
national  standard  must  range  somewhere  between  his,  or  a  yet 
lower  level,  and  the  standard  of  perfect  justice.      Such,  at  least, 
is  a  fair  inference.     As  we  come  East  from  the  Great  Yalley 
toward  the  AUeghanies,  we  reach  Ohio,  and  here  we  have  a  yet 
milder  symptom  of  national  unsoundness  in  Mr.  Sherman.     The 
standard  has  risen.    We  pass  on,  and  reach  the  great  commercial 
cities  of  the  seaboard,  and  here  we  find  an  elevated  financial 
morality.    The  standard  rises  to  its  highest  point.    We  conclude 
the  national  credit  is  to  be  graded  according  to  this  recognition 
of  elevations — this  moral  survey  of  the  heights  and  depths  of  the 
national  perceptions  of  honesty.     As  we  have  said,  the  Wall- 
street  view  and  the  European  view  of  the  situation  gives  a  net 
elevation  of  75 — 100  being  the  standard  of  absolute  integrity. 
We  accept  it  as  a  fair  average.     Should  the  Republicans  prevail 
in  the  coming  Presidential  election,  tlie  figure  is  too  low — we 
hope  much  too  low.       Should  the  Kebels  and  their  Northern 
allies  succeed,  the  figure  is  too  high.     Indeed,  in  that  event,  the 
situation  would  be  vibratory  and  panicky  in  the  extreme,  and 
we  might  look  for  a  reyjetition  of  the  fluctuations  and  losses,  the 
deep  shadows  and  dismal  prognostications  of  the  war.       The 
Kebels,  who  would  be  brought  into  power  by  such  an  anomalous 
and  untoward  event,  we  may  be  sure,  would  cheapen  the  debt, 
damage  the  credit,  and  enlarge  the  ol>ligations  of  the  nation  to  a 
formidable  and,  perhaps,  ruinous  extent. 


35 


CHAPTER  XI. 

CURSE    OF    A    DKPRKCIATED    CURRENCY. HOW    IT    OPERATES   TO   ROB 

ALL  CLASSES. POLITICAL    AND    SOCIAL    DANGERS    OF   INFLATION. 

There  are  some  popular  ideas  afloat,  favorinti;  the  policy  of  a 
depreciated  currencv,  which  are  injuriously  fallacious,  and  need 
exposure.  One  is  that  taxes  are  more  easily  paid  under  such  a 
system.  Another  is  that  the  producer  jiets  higher  i)rices,  and  so 
makes  more  money.     Let  us  look  for  a  iiioiiient  at  these  points. 

Taxes  are  paid  from  two  sources ;  the  earnings  of  labor  and 
the  earnings  of  cai)ital.  We  have  hitherto  given  the  reasons 
\\li\  labor  is  not  so  well  paid  under  a  system  of  paper  money  as 
in  a  currency  of  coin.  We  have  shown  that  wages  do  not 
keep  pace  with  the  enhancement  of  the  cost  of  living,  and  that 
the  interests  of  labor  are  not  thei-efore  favored  by  a  system  of 
paper  money,  but  are  seriously  injured  thereby.  We  have 
seen  that  its  earnings  are  less  and  its  expenditures  more; 
that  the  imposition  of  taxes  thus  weighs  heaviest  upon  the 
laboring  class,  at  those  periods  when  the  currency  is  inflated, 
they  having  at  such  times  more  to  pay  and  less  to  pay  with. 

How  it  is  with  cai)ital,  which  represents  the  savings  of  in- 
dustry and  the  accumulations  of  good  fortune,  there  is  no  room 
for  doubt.  There  is  no  pretense  anywhere  that  the  property 
holder,  who  has  earned  or  inherited  wealth,  and  lives  on  its  in- 
come, does  not  sutt'er  from  inflation,  lie  pays  more  for  the  cost 
of  living,  more  for  taxes,  while  his  income  remains  the  same.  It 
is  so  with  all  who  live  by  salaries.  Great  injustice  is  done  to, 
and  great  surt'ering  is  often  experienced  by,  these  two  classes, 
from  a  depreciation  of  the  currency.  They  reap  no  advantage 
from,  but  are  merely  innocent  victims  of,  the  inflation  policy. 
Their  voice  of  complaint  is  seldom  heard'  for,  though  numerous 
in  the  airirreirate,  thev  belonir  naturallv  and  bv  position  to  the 
(piii't  classes  of  the  coiuiiiunity.  They  sufler  greatly,  but  they, 
for  the  most  part,  sufler  in  silence.  The  rush  of  enterju-ise  in 
this  country  does  not  sympathizi'  with  them. 

Tlow  is  it  with  small  capitalists  of  a  diflerent  class ^  Take 
the  great  pi'oducing,  agricultural   interests  of  the  West.     These 


36 

numerous  Western  farmers  of  moderate  means  are  supposed,  of 
all  others,  to  be  benefitted  by  a  redundant  paper  circulation.  It 
increases  the  prices  of  their  corn,  their  wheat,  their  cattle,  their 
hogs,  and  their  surplus  generally.  But,  if  the  farmer  gets  more 
for  that  portion  of  his  crop  that  he  sells,  he  pays  more  for  every- 
thing he  buys.  He  i)ays  more  for  his  groceries,  his  clothing,  his  iron, 
his  leather,  his  tools,  and  his  labor.  So  that  his  gains,  at  best, 
are  at  last  only  on  the  final  balance  saved  after  the  year's  ac- 
counts are  settled.  That  surplus,  be  it  more  or  less,  is  in  paper 
money,  which  he  must  reduce  one-third  or  one-half  in  amount, 
as  the  case  may  be,  to  get  it  into  solid  money.  And  in  this  way 
it  comes  to  the  same  thing,  or  more  often  to  a  worse  thing  in  the 
end,  than  if  his  dealings  had  all  been  in  real  instead  of  fictitious 

money. 

But  his  paper  dollar  will  pay  taxes  as  well  as  the  gold  dollar. 
So  it  will.  But  the  tax  is  enough,  and  more  than  enough,  greater 
to  offset  the  advantage.  Taxes  are  imposed  to  defray  expenses, 
and  expenses  are  increased  in  proportion  to  inflation  always,  and 
generally  in  a  greater  degree ;  for  public  charges  of  all  kinds, 
prices  of  all  kinds,  are  not  only  calculated  upon  the  relative  value 
of  the  paper  issues  to  coin  at  the  moment,  but  upon  the  contin- 
gences  of  fluctuation  which  becomes  an  important  element  in 
fixing  values.  The  tax-payer  in  the  end  foots  all  these  charges. 
He  first  pays  the  actual  money  cost,  then  he  pays  the  difference 
between  that  and  the  sum  it  represents  in  paper  money,  and  then 
he  pays  for  the  risk  involved  of  a  further  inflation,  and  o-f  specu- 
lative values  incident  thereto.  But  even  this  is  not  all.  When- 
ever people  are  spending  money  (and  it  is  especially  so  with 
public  expenditures)  in  a  debased  circulating  medium,  there  is 
never  that  care  or  economy  as  when  tlicy  are  si)ending  hard 
money.  Silver  and  gold  are  never  squandered  as  are  paper 
promises  to  pay,  which  are  irredeemable,  and  are  constantly  fluc- 
tuating in  value.  And  thus  expenditures,  especially  i)ublic,  in- 
crease just  in  proportion  to  the  debasement  of  the  currency  in 
wdiich  they  are  defrayed,  and  not  relatively  only,  but  actually 
as  measured  by  the  specie  standard  ;  and  thus  are  taxes  multi- 
plied and  increased.  It  is  only  by  following  out  these  details  of 
the  subject  that  we  are  able  to  appreciate  how  it  is  that  a  depre- 
ciated  currency  is  a  robber  of  the  earnings  of  labor,  whether 


37 

capitalized  or  otlierwise,  at  every  step  and  in  every  relation.  But 
patient  reflection  shows  that,  view  the  sul)ject  in  what  li<;ht  you 
will,  a  debased  circulatino;  medium  is  of  itself,  aside  from  the 
moral  del)aucliery  engendered  by  its  examjde,  a  serious  and  ever- 
acting  mischiff,  (himaging  to  the  interests  of  the  great  body  of 
the  peo})le  in  every  walk  and  i)\ii-suit  of  life. 

But  there  are  those  who  reap  great  ]»r(>tit  from  an  inflated 
currency.  These  an>  the  large  capitalists  and  operatoi-s,  the 
speculators,  the  middlemen  ;  the  gamblers  of  the  Exchange,  in 
stocks,  in  ffold,  in  all  the  necessaries  of  life.  They  are  the  vul- 
ture  who  prey  on  an  innocent  jiublic.  They  buy  up  and  hoard 
every  commodity  ot  trade  in  order  to  advance  prices.  The 
greater  the  supj)ly  of  paper  money  the  greater  their  ability  to 
do  so.  There  is  no  machinery  so  effectual  as  this  to  rob  the 
earnings  of  labor.  The  banker  is  allowed  to  issue  his  promises 
to  pay,  which  he  never  redeems  ;  or  if  he  redeems  them,  it  is  in 
other  promises  no  more  valuable  than  his  own.  Thus  he  is  sel- 
dom called  upon  even  to  take  the  trouble  to  make  the  exchange. 
He  receives  at  the  rate  of  15,  20,  and  25  per  cent,  per  annum 
from  his  "  operating"  borrower,  for  the  use  of  his  capital,  and 
tlirough  him  it  is  extorted  in  the  last  analysis,  as  we  have  here- 
tofore shown,  from  the  earnings  of  labor  and  the  heli)less  con- 
sumer. So,  too,  the  middleman,  one  of  the  worst  of  the  para- 
sites of  the  commercial  world.  lie  stands  wherever  he  can, 
resolutely  between  the  producer  and  consumer,  and  lives  by  rob- 
bing botii.  Producing  nothing,  earning  nothing,  he  simply  sucks 
the  blood  of  those  who  earn  and  those  who  consume.  He  flour- 
ishes most  where  a  depreciated  currency  causes  an  artificial  rise  in 
prices  and  fluctuation  in  values.  He  was  hatched  in  swarms  by 
the  war,  and,  in  diminished  mnnbei-s,  still  atflicts  the  connnunity. 
All  his  efforts  are  aided  by  a  debauched  currency,  lie  pleads 
the  recollection  of  past  extortion  with  the  exhausted  buyer,  and 
deludes  the  inexperienced  seller  with  representations  of  a  con- 
tracting currency  and  falling  prices,  cheating  both  in  turn. 

And  thus,  pursue  the  subject  how  we  will,  it  turns  out  that 
inflation  is  oidy  another  term  for  the  rol)bing  of  honest  in- 
dustry, and  that  its  palpable  and  certain  eftects  are  to  make  the 
rich  richer,  and  the  ]ioor  jioorer. 

A  natural  state  of  things  has  no  such  features,  or,  if  it  has, 


38 

they  are  only  exceptional  and  occasional.     It  is  the  violent  fluc- 
tuations, M'hicli  are  the  necessary  consequences  of  an  inflated 
currency,  tliat  causes  the  mischief.     Witliout  these,  trade  is  com- 
paratively  steady,  and  prices  comparatively  reguUir.    Where  it  is 
otherwise,  it  results  from  natural  causes  over  which  no  control 
can  he  exercised — such  as  had  seasons  and  deficient  supplies,  or, 
on  the  other  hand,  overproduction  and  glutted  markets.     In  such 
a  state  of  refi;ular  trade,  the  numerous  intermediates  that  infest 
markets   during   the  periods  of   inflation,    cannot  thrive.      All 
healthy  traffic  consists  in  bringing  the  jjroducer  and  consumer 
into  immediate  contact.     But  where  prices  vary  and  rise  as  they 
do  when  an  over-abundant  currency  exists  to  stimulate  specu- 
lation, it  often  ha})pens  that  half  a  dozen  intermediates  stand 
between  the  producer  and  consumer,  each  one  exacting  his  profit 
— often  an  inordinate  and  extortionate  profit.     And  thus  the  in- 
nocent consumer  becomes  mercilessly  fleeced.     The  experience  of 
the  "War  has  illustrated  and  over  illustrated  this  fact,  till  there  is 
none  left  to  doubt  it.     The  knowledge  already  takes  form  and 
begins  to  enforce  itself  in  practical  remedies.     The  tribe  of  mid- 
dlemen have  carried  their  exactions  upon  the  busy  and  innocent 
consumer  to  such  a  pitch  that  at  length  he  turns  in  self-defense 
upon  his  oppressor.     Stores  are  being  established  upon  the  plan 
of  buying  directly  from  the  producer  and  selling  directly  to  the 
consumer,  without  the  costly  machinery  of  intermediates.     They 
have  even  commenced  in  the  City  of  New  York,  where  buyers 
have  for  long  years  considered  themselves  the  natural  prey  of  the 
sellers,  and  where  the  resistance  of  a  congvuner  to  being  plun- 
dered is  regarded  as  incorrigible  contumacy. 

We  see  in  this  fresh  enunciation  of  the  cooperative  principle 
a  vital  protest  against  the  malign  influences  of  inflation.  It  is  a 
hopeful  sign,  for  it  betokens  an  awakening  which  must  lead 
ultimately  to  pregnant  reflections  and  conclusions  upon  the  un- 
derlying cause  of  the  oppressions  practiced  upon  the  consumer. 
The  resistance  to  extortionate  and  ruinous  profits  we  may  hope 
will  end  in  equally  effectual  resistance  to  the  scandalous  and 
oppressive  cause  of  high  prices. 

We  warn  the  demagogues  of  inflation  that  they  are  playing 
with  a  two-edged  sword  in  dabbling  with  their  greenback  theo- 
ries.    The  great  class  of  consumers,  with  diminished  earnings,  is 


30 

coiiiiii^  to  the  siirtaee,  with  interests  to  he  considered,  jmd  votes 
to  he  given.  Their  tirst  want  and  nio.si  eager  demand  will  lie  tor 
tood  and  clothing  at  cheap  rates.  Thev  will  not  he  satistied  hv 
a  ])a|)er  money  system  which  raises  prices,  fosters  sjieculation, 
and  itrings  anew  into  a  hot-hed  existence  a  swarm  of  greedy  in- 
termediates to  fatten  npon  their  necessities.  Let  it  he  rehiem- 
hered  that  if  it  he  easy  and  ]>leasant  to  make  pa])er  money  jilenty, 
it  is  e(jually  easy  to  spread  dissatisfaction  and  distress  by  the  en- 
hanced prices  that  are  sure  to  follow.  The  country  could  endure 
such  exactions  during  a  period  ^t"  war,  when  every  man  was  a 
direct  or  indirect  recipient  of  (Tovernmeut  pro  tits,  or  Government 
bounties  and  pay;  but  in  time  of  peace  it  could  not  be  endured. 
The  results  would  be  untold  sutferings,  accompanied  by  agita- 
tions that  would  revolutionize  parties,  convulse  society,  and  end 
in  irre]>arable  ]KX'uniary  disasters.  Pa])er  uioney  not  bottomed 
on  coin  never  did  stand,  and  never  will  stand.  It  will  find  its 
end  in  one  of  tw<>  wavs.  A  rii^id  i)iil)lic  virtue  will  cause  it  to 
disa])pear  through  a  steady  enforcement  of  its  payment.  An 
opposite  temper  will  result  iu  expansion,  and  one  expansion  will 
beget  another,  and  this  is  the  broad,  open  highway  to  a  final  ex- 
plosion and  general  bankruptcy. 

We  are  not  at  all  disposed  to  play  the  part  of  a  prophet  of 
evil,  and  ])redict  that  this  generation  is  going  to  laiui  in  such 
a  Dismal  Swamp  as  this;  but  the  idea  that  the  greenbacks 
should  not  be  paid,  and  woi-se  still,  that  the  volume  of  them  may 
even  be  safely  increased,  goes  exactly  in  that  direction  ;  and  until 
it  is  indefinitely  abandoned  by  all  sides,  constitutes  our  most  iin- 
niiuent  peril. 


CHAPTER   Xll. 

DRIFTING    AWAY    FROM    RESUMPTION. DANGERS    OF    WHOLESALE 

REDUCTION    OF    TAXATION. 

Unless  Congress  shall  exhibit   nioiv  intelligence  and  more 
moral  courage  than  they  have  thus  far  shown  evidence  of  j>os- 


40 

sessing  on  the  financial  question,  we  stand  a  fair  chance  of  getting 
quite  out  sight  of  land  within  the  next  twelve  months. 

We  have  been,  and  in  fact  are  now,  pretty  near  to  resump- 
tion ;  and  if  our  legislators  were  resolute  and  intelligent  to  grasp 
the  situation  as  they  might  grasp  it,  we  would  be  out  of  our 
difficulties  in  six  months.  But  they  are  letting  slip  their  golden 
opportunity,  and  by  so  doing  they  are  allowing  things  to  run  into 
a  condition  from  which  we  can  see  no  reasonable  prospect  of  ex- 
trication within  any  definite  period. 

At  this  moment  we  are  flush.  The  Treasury  has  had  a  large 
income  and  shows  good  balances.  If  it  could  be  allowed  to 
retain  both,  and  be  permitted  to  fund  about  one  hundred  millions 
of  its  interest  bearing  and  plain  legal  tenders,  it  could,  by  the 
aid  of  a  sufficient  foreign  credit  (not  difficult  to  secure)  maintain 
its  hold  and  control  the  situation,  till  it  carried  the  country 
triumphantly  through  resumption.  But  unless  it  can  maintain 
its  reserves,  it  is  going  to  lose  its  power  to  do  any  such  thing. 
The  specie  in  the  Treasury  is  the  only  basis  the  country  has  for 
resumption.  The  banks  won't  keep  any,  while  they  can  pay  in 
legal  tenders.  They  have  got  no  coin ;  and  they  will  not  buy 
it  while  they  can  bank  at  the  expense  of  the  Government,  so 
innocently  paying  them  three  per  cent,  interest  on  a  large  portion 
of  their  reserves. 

Now  see  what  Cono-ress  is  doing.  It  is  slicing  down  the 
revenues  in  all  directions.  It  has  gone  so  far  already  as  to 
establish  a  x)ositive  prospective  deficit,  on  the  most  liberal  estimate 
of  receipts.  Just  so  far  as  these  estimates  fail,  just  so  much  more 
will  be  the  deficit.  The  most  experienced  calculators  believe  we 
shall  fall  short  of  the  revenue  to  meet  our  expenditures  in  the 
next  fiscal  year  by  forty  or  fifty  millions.  Where  is  this  going 
to  leave  us  a  year  from  the  present  Spring  ?  Why,  with  one-half 
our  present  specie  reserve  dissipated,  and  with  no  diminution 
whatever  of  our  volume  of  paper  money — indeed  we  shall  be 
lucky  if  it  is  not  increased.  If  this  prospect  be  realized,  and  there 
seems  to  be  no  doubt  it  will  be,  is  it  not  plain  that  our  ability  to 
resume  specie  payments  will  gradually  decline  from  this  hour, 
and  not  be  anything  like  as  great  a  year  hence  as  it  is  now? 
Are  we  not,  then,  drifting  straight  out  to  sea,  with  a  prospect  of 
being  entirely  out  of  sight  of  land  within  one  or  two  years  ?     If 


41 

Congress  will  not  even  consent  to  liold  on  to  its  ])resent  position 
of  strenirth,  l)nt  deliheratelv  ivliiKiiiishes  its  resources  and  posi- 
tion  beciuiso  it  is  more  agreeable  not  to  pav  tlian  it  is  to  pay, 
does  anvhody  sui>])ose  that  a  year  hence,  in  tlie  Innry  of  a  short 
session,  and  the  agitation  of  an  inconiitig  Administration,  it  is 
going  to  become  snddenly  virtu. ms  and  undertake  to  dam  the 
currents  it  has  knowingly  set  in  in. .tion  '.  ^'c-,  it  will  <lo  it  jnst 
80  surely  as  the  P^thiopian  will  change  his  skin  or  tlie  leopard  his 
spots.  The  fact  is  palpable  that  the  action  of  Congress  now  is 
shaping  results  for  the  next  two  years,  and  when  we  shall  have 
run  astern  a  hundred  millions,  as  we  now  seem  likely  to  do 
within  that  ])eriod,  what  then  will  be  the  state  of  the  Treasury 
balances,  and  what  will  be  the  i>ros]>ect  of  resumption?  There 
will  be  just  as  much  i)ai»er  money  afloat  then  as  there  is  now,  or 
more,  and  not  an  available  si>ecie  dollar  in  the  Treasury  to  redeem 
it  with.  In  fact,  by  that  time  it  is  not  at  all  unlikely  we  shall 
be  buyers  of  coin  to  pay  our  interest. 

This,  we  say,  is  the  present  prospect,  taking  the  recent  action 
of  Congress  in  cutting  off  the  resources  of  the.  Treasury  as  the 
basis  of  ojunion.  We  do  not  think  there  is  any  statemanshi])  in 
the  doctrine  of  Senator  Conkling,  that  he  is  willing  to  face  a  deficit 
in  order  to  stop  lavish  api^ropriations.  If  we  were  on  a  hard  bottom 
this  doctrine  could  be  better  tolerated — though,  with  a  heavy 
national  debt  on  our  shoulders,  it  is  only  too  ]»robable  that 
actino;  on  it  under  any  circumstances  would  create  a  greater  evil 
than  it  would  remedy.  But,  in  view  of  its  direct  and  pernicious 
influence  on  resumption,  it  is  at  this  moment  a  most  damaging 
rule  of  action. 

Every  dollar  that  we  take  out  of  the  Treasury  defers  resumption. 
Everv  tax  we  remove  by  which  we  dei)lete  it  ])uts  oft'  the  day 
of  sju'cie  payments.  Instead  of  this  penny-wise  and  ])ound- 
foolish  policy  of  sacrificing  our  revenues  till  we  are  sure  not  to 
have  enough  left  to  defray  even  the  ex]ienses  of  the  Government, 
we  ought  to  husband  them  faithfully  and  ai»ply  them  energeti- 
callv  to  extiuLruish  those  current  obligations  of  the  (-rovernnuMit, 
which  arc  ])rolonging  tlu>  ]HM-iod  of  its  insolvency  and  its  disgrace, 
hinderinu"  the  revival  of  trade  and  ])rosperity,  and  postponing 
the  approach  of  that  period  and  those  conditions  u])on  which 
alone  can  be  built  any  solid  anticipations  of  either  health  or 
regularity  in  our  finances. 


42 

But  wlio  proposes  anything  of  the  sort  in  Congress?  The 
friends  of  sound  finance  are  a  majority  nowhere,  not  even  in  the 
Committees.  The  Democrats  lack  principle,  and  the  Republicans 
lack  ]duck,  and  so  the  demoralization  is  general.  Every  weak 
l)ody  voted  to  change  the  policy  of  specie  payments  to  one  of 
indefinite  suspension.  AVhy  ?  Chiefly  because  we  are  going  to 
have  a  Presidential  election.  We  admit,  as  cheerfully  as  any- 
body can,  that  every  thing  depends  on  carrying  that  election. 
If  the  Rebels  and  their  Northern  allies  get  possession  of  the 
Government,  we  know  what  that  means.  It  is  a  road  which 
leads  into  a  quagmire.  Anything  is  to  be  preferred  to  that. 
But  we  do  not  believe  the  Republicans  gain  anything  by  a 
proposition  to  take  a  longer  road,  landing  at  last  in  the  same 
slough.  We  see  neither  sense  nor  good  policy  in  trading  away 
tlie  strong  position  of  the  Treasury  for  the  vaguest  sort  of  politi- 
cal advantao-es.  There  will  be  other  elections  to  come  after  1868 
The  responsibilities  of  sound  legislation  cannot  be  shirked.  If 
Congress  now  adopts  a  policy  for  a  temporary  purpose  which  will 
not  stand  the  test  of  time  and  experience — which  we  know  this 
rash  proceeding  of  inviting  a  large  deficit  will  not — it  will  incur, 
rather  than  escape,  the  most  damaging  political  responsibilities. 
Before  the  Republicans  in  Congress  finally  abandon  the  only  means 
and  agencies  they  have  for  the  control  of  the  question  of  resump- 
tion, we  beg  to  suggest  that  they  should  inquire  into  the  manner 
in  which  they  propose  to  treat  the  financial  question  in  case  they 
are,  by  the  coming  elections,  left  in  control  of  the  Government? 
We  should  suppose  they  must  see  by  tin's  time,  that  the  very  first 
step  toward  escaping  from  the  einbarras^^ment  with  which  the 
whole  sultject  is  environed  is  resumption.  It  is  the  only  method 
for  abating  the  burden  of  the  loan,  and  for  settling  the  vexed 
and  threatening  (piestion  of  taxation.  Under  such  circumstances 
can  a  greater  folly  be  perpetrated  than  to  lose  control  of  this 
result  for  years  to  come  ? 


43 


ClIAPTKli  XIII. 

ii(»w  'lo   i:i:siMi:. — sisiMiT.iciiv  <»i'  'iiik   it. an. — <i!5.(i:("ii<»\s. 

CoNGKKss  constantly  hetoj^s  itst'lt"  over  tlic  ('((iisHU'i-atiDn  of 
iiK'tliods  of  resuiiiptioii.  Evurylxxly  ha-  his  jihiiis.  Somk-  want  t<i 
resume  at  once,  some  want  ti»  ilctcr  ri'snni))tion  one  year,  some 
two,  some  five,  some  ten.  Everybody  bnt  the  immediate 
resumption  nirii  (ahis!  who  arc  they?)  has  a  patent  piece 
of  nnichinery  hy  whicli  the  ohject  can  l)e  effected  so  as  not 
disturb  anybody.  Each  man  l)riniis  out  liispet  plan  and  exjdains 
its  parts,  every  other  man  disbelieves  in  it,  exposes  its  defects, 
or  slioM's  wherein  it  will  not  work,  and  thus,  one  after  anotber, 
all  these  patent  iin  entions  i>;et  set  back  upon  the  shelf. 

If  our  dealers  in  financial  to})ics  in  Congress,  would  lay  aside 
their  desire  for  complex  contrivances  to  accomplish  simple  ends, 
and  would  try  simple  methods,  and  follow  plain  ways  instead,  we 
are  sure  they  would  find  fewer  ol)stacles  in  their  path.  If. 
besides,  they  would  not  seek  to  postpone  tlicir  action  to  a  more 
convenient  season,  when  evervbodv  should  be  readv  ; 

"That  g&y  to-morrow  of  the  inind, 
whicb  never  comes," 

« 

])Ut  would  merely  inrpiire  what  can  he  done  to-day,  and 
determine  to  do  that,  thev  would  find  all  difficulties  ici'adually 
disa])peai\ 

The  resumption  of  specie  ])ayments  is  the  most  simple  and 
homely  of  problems,  ft  consists  of  nothiiii;-  in  the  wctrld  but 
payinii;  debts.  Suspension  and  intfation  results  from  nothing 
but  this,  that  somebody  owes  nioi-c  than  they  pay.  It  is  a  con- 
dition generally  brought  abniit  by  the  few,  not  by  tlie  many. 
The  great  mass  suffer  and  the  few  only  profit. 

The  way  to  remeily  the  ditficulty  is  simply  to  insist  upon 
those  paying  who  can  pay.  If  it  i>  the  banks  who  owe,  we  have 
only  to  say  to  them,  von  nin>t  disdiarire  vnur  in(le])tedness.  The 
world  holds  your  j)romises  to  pay,  to  which  yoii  give  no  attention. 
Pay  them,  or  at  least  so  many  of  them  as  })eople  want  you  to 
pay.  A  is  in  no  want ;  B  is  not.  They  are  contented  to  hold  and 
use  your  promises.     Ihit  C  is  differently  situated  ;  he  owes  debts 


44 

which  vour  notes  will  not  discharge,  and  he  needs  pay  for  such  of 
them  as  he  liolds. 

Unlock  your  reserves,  wliich  as  banks  and  l)ankers  you  are 
supposed  to  have,  and  discharge  your  ohligations.  Is  not  this  a 
reasonable  demand  ?  There  is  no  machinery  required  for  this 
ojieration.  No  automatic,  rotary,  patent  instrumentality  required 
to  engineer  the  payment  of  a  l)ank  note  over  a  counter.  Yet,  so 
far  as  the  banks  are  concerned,  this  sim])le  operation  of  discharg- 
ino-  a  debt  due,  is  all  there  is  of  the  too  much  exaggerated  effort 
of  resuming  specie  payments. 

Nobody  can  deny  the  justice  of  such  a  requisition  upon  the 
banks.  Banks  are  supposed  to  be,  and  they  generally  are,  the 
most  solid  and  solvent  of  all  debtors.  They  hold  the  money 
deposits  of  everybody  in  tlie  country  who  has  money.  They 
were  established  to  pay.  They  are  able  to  pay.  They  are 
expected  to  pay.  They  ought  to  pay.  The  demand  that  they  do 
pay  is  the  most  proper  and  the  most  reasonable  of  all  demands. 
What  is  more  than  all,  they  will  pay  when  payment  is  insisted  on. 

We  pass  from  the  banks  to  enquire  wdio  else  owes  more  than 
they  pay,  and  tlius  stand  in  the  way  of  specie  payments,  and 
that  restoration  of  the  equilibrium  of  our  money  system,  which 
can  alone  put  us  on  a  par  with  other  nations?  The  answer  is — 
the  Government  itself.  Just  here  we  approach  the  practical 
])oint  to  which  the  efforts  of  our  legislators  should  be  directed. 
What  can  they  do  towards  enabling  the  Government  to  pay  its 
demand  and  overdue  obligations  now  in  the;  hands  of  those  who 
want  them  paid  ?  Is  there  any  plain,  homely,  everyday  thing 
they  can  do,  each  one  and  all  of  them,  towards  this  simple  but 
vital  result?  Well,  there  is.  What  is  it?  Why,  just  this:  Allow 
the  head  of  the  financial  department  of  the  Government,  known 
as  the  Secretary  of  the  Treasury,  to  pay  these  obligations/w-s?!  as 
fast  as  he  is  able  to  pay  them . 

Is'nt  that  a  simple  process  ?  And  one,  too,  in  wliicli  every  man 
in  Congress,  high  or  low,  has  a  voice  and  a  vote  ?  This  is  the 
one  nearest  duty  to  be  done.  It  does  not  require  any  planning, 
nor  scheming,  nor  any  Butlerian,  automatic,  rotary  patent  system 
for  its  performance ;  and  yet  it  is  the  one  which,  if  faithfully 
and  discreetly  performed,  overcomes  every  obstacle,  and  leads 
directly  to  a  resumption  of  specie  payments  with   the  greatest 


45 

possible  rai)i(lity,  ( wliatever  tluit  may  be ;)  and  yet,  witliout  undue 
celerity,  and  witliout  aiTivin<::at  tliat  result  one  day  too  soon  for  tlie 
interest  or  al)ilitv  of  the  country.  For  assuniin<r,  as  we  contend, 
all  sound  financieriuL!:  must  assunic,  that  it  is  the  first  and  most 
necessary  duty  of  the  (Government  to  brin^-  our  cireulating  medium 
to  a  specie  basis,  and  to  sb(»ulderthe  whole  national  debt  manfully  ; 
this  payino;  of  debts  will  in  no  way  abridge  the  ability  of  the 
country  to  diseliaro-e  its  o])ligations  to  its  creditors.  ( )n  the 
contrary,  it  will,  by  invi<;oratin«;  credit,  and  assurinji;  stability  to 
industrial  operations,  ^'ive  a  fresh  imi-iilse  to  the  <irowth  and 
]>ros])erity  of  the  country,  and  renewed  strength  and  vitality  to 
its  finances. 

This  simple  i»rocess  of  paying  debts  just  as  fast  as  the  debtor, 
Avhetlier  bank  or  Government,  is  capable  of  discharging  them, 
is  the  true,  and  cert;nn,  and  we  must  add,  the  only  process  by 
wbich  the  country  can  extricate  itself  from  its  present  condition. 

Pay  we  nnist,  in  the  end,  uidess  we  intend  to  repudiate.  And 
if  we  are  in  earnest  to  recover  a  solyent  position,  we  must  act 
so  as  to  strengthen  our  credit.  Thi>  i>  the  speediest  and  cheapest 
method.  To  be  sure,  we  can  go  mumping  along  on  crutches,  as 
we  are  now  doing,  but  every  day  of  our  feebleness  and  waverino' 
adds  to  the  distrust  of  our  recovery.  An  invalid  \\\u>  does  not 
improve  must  be  considered  to  be  getting  worse.  If  we  really 
mean  to  i)ay,  the  sotmer  we  say  st>,  in  no  uncertain  tones,  and  set 
about  it  in  eai-nest,  the  easier  wc  shall  find  it  to  preserve  our 
credit,  and  the  nioi-e  speedily  we  shall  revive  our  trade  and 
industry. 

Tricks  and  contrivances,  and  schemes  of  postponement,  and 
above  all,  ])ro]»ositions  to  increase  our  j>aper  money  issues,  in 
view  of  the  plain  duty  and  necessity  of  our  case  as  we  have  now 
set  it  forth,  it  \\\u>\  be  admitted  will  avail  absoluti'K  nothinir. 
Unless  we  intend  to  escape  from  oiii-  >itnatioii  bv  n«)t  iiaviiiir  at 
all,  Ave  contend  that  the  more  steadily  and  resolutely  wi'  pm-sue 
tlie  paying  judicy  the  better  for  the  country,  and  the  sooner  we 
shall  be  out  on  safe  and  solid  ground,  and  the  sooner  will  the 
general  ])rosj)erity  revive. 

We  have,  in  a  former  chai>tcr,  shown  what  we  believe  the 
Government  can  do.  and  what  the  banks  can  do,  in  the  wav  of 
resumption.     But  this  is  neither  here  nor  then'.     We  nuiy  have 


46 

over-rated  or  under-estimated  their  ability.  What  we  contend 
for  now,  is  that  true  policy  dictates  both  shall  be  required  to  do 
their  best.  And  that  Congress,  instead  of  restraining  the  Secre- 
tary of  the  Treasury  from  discharging  such  obstructive  liabilities  in 
the  way  of  resumption,  as  he  has  the  ability  to  discharge,  shall 
remove  all  restrictions  upon  him  which  now  forbid  such  action  ; 
and  in  this  way  allow  the  Government  to  approach  the  payment  of 
its  current  obligations  just  so  fast  as  it  shall  tind  itself  able  to  do  so. 

The  stereotyped  objection  to  this  simple  and  natural,  and 
ultimately  inevitable  course,  we  perfectly  understand.  It  is,  that 
when  the  Government  withdraws  its  demand  notes,  the  country 
will  be  without  sulticient  currency  to  do  its  business.  To  this 
tliere  are  two  answers.  In  the  first  place,  it  is  no  part  of  the 
duty  of  the  Treasury  of  any  government  to  issue  currency  for 
the  public  use.  And  no  solvent  government  does  it.  And  no 
respectable  theory  of  government  can  admit  the  propriety  of  a 
demand  for  such  a  currency  for  a  moment.  The  issuing  of  it, 
at  any  time,  is  simply  one  of  the  make-shifts  of  insolvency.  In 
the  second  place,  the  apprehension  of  a  scarcity  of  money  is 
without  foundation.  As  we  have  often  repeated,  the  world  is 
plethoric  of  the  precious  metals ;  and  this  nation  is  one  of  the 
great  producers  of  coin.  Then  we  have  a  banking  system  capa- 
ble of  indefinite  expansion,  and  of  furnishing  all  the  paper 
money  the  business  of  the  country  requires  or  can  possibly  main- 
tain. And  there  is  no  reasonable  objection  to  its  extension  on 
the  simple  condition  that  the  banks  shall  pay  their  debts,  like 
everybody  else,  when  called  upon. 

These  two  sources  of  supply  will  give  us  all  the  money  we  need. 
They  will  prevent  any  jjossible  dearth  arising  from  the  with- 
drawal of  greenbacks.  Our  difficulty  is  that  we  have  been 
running  so  long  sustained  by  this  wretched  go-cart  of  Treasury 
money,  furnished  by  the  Government,  that  the  country  fears  to 
trust  itself  to  its  own  legs.  It  has  gone  on  crutches  so  long,  that 
though  really  hale  and  hearty,  and  indignant  at  all  imputations 
of  weakness,  it  yet  hesitates  to  throw  them  aside. 

The  country  is  i-eally  in  a  comparatively  sound  condition,  only 
that  it  distrusts  itself,  or  we  should  say  its  legislators  distrust  it. 
If  Congress  would  only  discard  its  unmanly  timidity,  and  cease 
to  place  an  absurd  reliance  on  a  disgraceful  paper  system,  it 
would  soon  find  the  country  cured  of  all  its  financial  ills. 


47 


CnAPTKIi  XIV. 

ON    THE    CHARACTKR    l)V   THE    PIBLIC    DEBT. 

What  is  ;i  piihlie  louii  f  A  jtiihlic  lo;iii  is  n  creation  of  tlie 
law.  Tilt'  law  j^ivcs  it  sliajx-s  dimension,  suhstance,  value,  char- 
acter. It  makes  it  ])ro|)erty;  just  a-s  much  property  as  a  shi]),  a 
house,  or  a  railrna<l.  It  is  made  a  perfect  and  detined  whole  when 
It  is  created.  It  is  like  a  dollar  from  the  mint,  and  like  it,  is  a 
speeitic  and  absolute  quantity.  When  it  is  issued  it  comes  into 
existence  subject  to  the  precise  rights,  privileges  and  burdens, 
of  all  other  kind  of  [iroperty,  except  it  be  otherwise  exempted. 
Government  has  no  more  claim  or  right  to  take  hold  upon  it  and 
subject  it  to  exactions  of  any  sort  whatever,  than  it  has  to  seize 
upon  any  other  species  of  property  and  subject  it  to  special  impo- 
sitions. Government  <loes  have  a  right  to  levy  upon  property  to 
any  needful  and  i)roper  extent.  It  may  imj)ose  taxes,  it  may 
make  exactions.  It  may  compel  [)roi>erty  to  yield  of  its  income, 
or  of  its  substance.  But  it  has  no  right  to  impose  unequal 
burdens.  All  property  must  share  alike  and  in  proptjrtion  to 
its  value.  It  may  not  seize  upon  a  shi]»  or  a  railroad,  and  coui- 
])el  it  to  yield  n|i  one-tifth  or  one-tenth  of  its  earnings  to  the 
Treasury,  while  it  imposes  no  such  demand  upon  warehouses  or 
on  money  at  interest.  It  may  not  seize  uj)on  the  coupons 
attached  to  its  own  loans  and  exact  a  share  thereof,  without  being 
guilty  of  ecpial  injustice. 

Again,  a  ])ui)lic  loan  is  a  public  contract  between  the  State 
and  its  creditor.  And  a  contract  is  an  instrument  which  cannot 
be  changed  except  by  the  jjarties  to  it.  80  sacred  are  the  obliga- 
tions imj)Osed  by  a  ci>ntract,  that  they  were  deemed  worthy  of 
protection  in  our  fumlamental  law  at  the  foundation  of  the  (iov- 
ernment.  It  is  an  express  stipulation  of  the  Federal  Constitu- 
tion that  the  validitv  of  ci>ntracts  shall  not  be  imi)aired  bv  le<ris- 
1  at  ion. 

The  public  loan  therefore  is  an  absoluti',  well  detined  entitv, 
in  respect  to  its  character  as  property,  of  as  absolute  substance 
and  proportions  as  a  church,  a  theatre,  or  a  bank.  And  gov- 
ernment has  no  more  ri«j,ht   ()Ver  one  than  it  has  (»\i'r  tlii'  other. 


48 

It  parted  witli  every  right  over  a  public  loan,  that  it  does  not 
hold  equally  against  all  property,  when  it  fixed  its  terms,  and 
receiving  its  agreed  value,  passed  it  over  to  the  public  creditor. 
Up  to  that  period  it  could  prescribe  terms  and  conditions.  After 
that  period  it  has  nothing  left  to  it  but  to  comply  exactly  and 
absolutely,  with  those  terms  and  conditions.  The  idea  has  l)een 
advanced,  (and  it  is  the  foundation  stone  of  all  the  pro])ositions 
to  impose  a  special  tax  on  the  government  bonds,  or  to  diminish 
the  established  rate  of  interest,)  that  when  a  State  makes  a  con- 
tract it  may  change  that  contract  in  any  particular,  except  in 
those  in  which  it  has  stipulated  it  would  not  change  it.  It  seems 
incredible,  but  it  is  nevertheless  true,  that  grave  arguments  for 
taxing  the  5-20  bonds  have  been  made  in  Congress,  based  upon 
thi>  construction  of  the  Government's  right  as  a  party  to  a  con- 
tract. 

Under  such  a  construction,  an  instrument  of  this  sort  ceases  to 
have  any  significance  whatever.  For  example,  the  Government 
agrees  to  pay  me  one  hundred  dollars  in  twenty  years,  and 
during  that  period  to  pay  me  six  dollars  a  year.  For  this  agree- 
ment on  its  part  I  loan  it  one  hundred  dollars  of  my  money. 
The  contract  is  simple  and  direct.  It  constitutes,  if  made  between 
individuals,  an  absolute  and  unchangeable  bargain  except  by  con- 
sent of  both  parties.  But  the  claim  in  (piestion  applies  to  this 
contr;act,  and  it  is  held  that  inasmuch  as  Government  nowhere 
says  in  such  a  contract  that  it  will  not  tax  the  bond,  that  this  is  a 
reserved  right  it  may  exercise  to  any  extent  it  pleases.  In  other 
words  it  may  tax  the  bond  out  of  existence.  It  thus  becomes  in 
effect  a  claim  to  annul  the  agreement  and  extinguish  its  value. 
Xow  this  is  the  most  transpai-ent  legal  cliicanery.  For  what  is  a 
contract^  It  is  an  affirmative  proposition.  It  proposes  to  do 
certain  things.  And  every  just  construction,  and  we  suppose 
every  construction  ever  put  upon  one  since  contracts  were  in- 
vented, excludes  every  interpretation  which  negatives  its  terms. 
In  otlier  words,  a  contract  is  an  engagement  to  be  fulfilled  accord- 
ing to  its  precise  stipulations.  In  its  nature  and  essence  it  pre- 
cludes all  imjtlications  inconsistent  with  these  stipulations. 

In  the  light  of  this  exposition  of  the  essential  nature  of  a  pub- 
lic loan,  we  contend  that  Bills,  like  Mr.  Sherman's  and  Mr.  Hen- 
derson's, to  lower  the  existing  rate  of  interest  on  the  national  se- 


49 

curities,  and  ]»roi)Ositi()nrt  made  in  tlie  House  to  exact  a  sjieeial 
deduction  in  the  shape  of  a  tax  tliereon,  are  alike  inai)proi)riate 
and  discreditable.  We  contend  that  the  Goveranient  has  not  the 
shadow  ot  a  ri^ht  to  do  either.  So  long  as  the  national  faith  is 
maintained  they  will  not  do  either.  Thej  cannot  tax,  and  they 
cannot  abate  the  existing  rate  «)f  interest,  without  violating  a 
specitic  contract,  without  seizing  private  property  and  sacrificing 
it  to  public  uses  without  com])ensation.  Upon  the  su])])<isition 
that  we  are  not  to  abandon  the  line  of  integrity  in  treating  the 
public  creditors,  these  lulls  and  propositions  must  then  fail  ;  and 
the  sooner  they  are  hustled  out  and  committed  to  the  waste 
basket,  the  better  for  the  country,  and  the  better  for  their  ad- 
vocates. 

In  aiming  to  secure  two  desirable  objects,  namely,  the  reduc- 
tion of  the  rate  of  interest  on  the  bonds,  and  the  quieting  of  the 
agitation  on  the  (piestion  of  municipal  taxation,  they  ]>roceed 
upon  impracticable  lines  of  approach.  The  fact  is,  we  cannot 
honorably  secure  either  of  these  objects  but  in  one  way.  That 
way  is  to  pay  otf  the  existing  loan,  and  to  issue  another,  and 
make  it  subject  to  municipal  taxation.  This  is  the  simple,  and 
natural,  and  only  (piieting  process.  Happily,  the  existing  loan  is 
in  that  form  which  enables  the  Trea^^ury  to  do  this  without  viola- 
tino-  anybodv's  riy;hts.  The  5-20s  are  due,  or  coming  due  di- 
rectly.  But  the  question  arises,  in  what  shall  the  5-20s  be  paid  ? 
There  is  just  one  way  to  solve  that  question,  and  only  one.  Tuat 
is,  by  equalizing  ihe  value  of  the  greenback  with  coin.  "We  must 
put  our  finances  on  a  specie  bfisis.  Until  we  can  summon  resolu- 
tion to  do  this,  we  shall  continue  to  be  environed  with  embarrass- 
ments and  impediments,  and  be  entangled  at  every  step,  and 
frustrated  in  every  endeavor  to  relieve  the  country  from  the  two 
ao-itatinf  questions  of  rates  of  interest  and  method  of  taxation  on 
our  bonds,  to  which  we  have  referred.  But  with  resumption, 
we  ]>ut  an  end,  at  once  and  forever,  to  all  these  difficulties. 
Until  we  do  this  they  will  be  a  never-ending  and  invincible 
perplexity. 


50 


CHAPTER  XY. 

INVIOLABILITY    OF   THE   PUBLIC    FAITH. FATAL    CONSEQUENCES    OF 

REPUDIATION. 

Having  shown  that  Government,  in  creating  a  loan,  creates  a 
piece  of  property  with  all  the  rights  of  other  property,  and  that 
it,  at  the  same  time,  enters  into  a  specific  contract  with  its  credi- 
tors, which  it  has  not  the  slightest  right  to  vary  without  their 
consent,  we  proceed  a  step  further. 

Government,  in  negociating  a  loan,  does  more  than  create 
property,  or  enter  into  an  ordinary  contract.  It  offers  an  obli- 
gation, and  guarantees  its  performance,  under  the  most  sacred 
sanction  known  to  mankind.  As  the  debt  it  incurs  is  not  recover- 
able by  law,  and  cannot  be  enforced  by  any  of  the  processes  which 
run  against  property  or  individual  debtors,  Government,  in 
lieu  of  this  security  to  the  holder  of  the  loan,  pledges  the  national 
faith  and  honor  for  its  payment.  It  creates  what  is  understood 
in  all  mercantile  and  financial  circles  as  the  highest  species  of 
obligation  known  in  human  transactions.  This  is  the  debt  of 
honor.  In  all  cases  of  ordinary  bankruptcy,  the  debtor  holds 
himself  bound  to  pay  this  class  of  debts,  whatever  becomes  of  the 
general  creditor.  The  debt  for  which  a  man  pledges  his  general 
property  may  be  but  partly  paid,  for  the  property  may  prove  in 
the  end  insufficient.  But  the  debt  which  stands  alone  on  the 
personal  honor  of  the  debtor,  such,  for  example,  as  where  the 
creditor  is  an  endorser,  is  considered  a  debt  to  be  paid  at  all 
hazards,  and  at  all  costs  and  sacrifices.  A  bankrupt  debtor  may 
escai)e  all  other  obligations  under  plea  of  poverty,  but  these  he 
can  never  escape  without  incurring  a  weight  of  odium  fatal  to 
his  character. 

Of  the  same  nature,  only  of  so  much  higlier  character,  as 
Government  is  higher  than  the  individual,  are  all  Government 
obligations.  The  Government  debt  is  the  honorary  debt  for  bor- 
rowed money.  In  the  shape  of  obligation  then,  there  is  not,  and 
cannot  be,  any  higher  or  more  solemn  form  of  indebtedness  that 
the  Government  promises  to  pay.  No  nation  can  repudiate  this 
obligation,  without  setting  an  example  fatal  to  the  public  morals, 


51 

and  covering  itself  with  dis<^race.  Witli  wliat  face  can  a  govern- 
ment nuike  or  execute  laws  to  enforce  })rivate  contracts,  wliile 
itself  sets  the  exanijjle  of  tlie  repudiation  of  public  obligations? 
The  repudiator  is  an  enemy  to  law  and  order.  Jle  sets  himself 
against  society  and  g(jvernment ;  for  he  inculcates  the  morals  of 
the  highwayman,  and  substantially  proposes  that  the  connnunity 
shall  practice  the  highwayman's  vocation.  Thus  he  practically 
advocates  the  dissolution  of  the  social  compact  and  of  the  political 
fabric.  And  yet,  the  rank  fecundity  of  our  violently  agitated 
political  times  produces  the  rei)udiator,  open  and  avowed,  as 
well  as  the  covert  and  disguised  specimens.  Our  words,  tliere- 
fore,  on  this  point  are  not  wasted,  supei-Huous  as  they  should 
seem. 

Again,  no  nation  can  atibrd  to  sacrifice  its  public  credit,  for 
no  nation  is  truly  indei)endent,  unless  it  has  the  }>ower  to  assert 
its  rights,  avenge  its  wrongs,  and  defend  itself  against  <dl  comers. 
It  must  have  the  ability  to  make  war,  and,  in  our  modern  times, 
to  nnake  war  on  a  large  scale.  If  England  claims  to  imprison 
our  fellow  citizens,  on  the  ground  that  they  are  enemies  in  dis- 
guise, as  witness  the  innocent  sufferings  of  our  unol)trusive  and 
inoffensive  Fenian  brothers  ;  or  if  she  claims  to  build  ships,  and 
arm  and  man  them,  to  plunder  our  shipping,  as  witness  the 
Alabama  and  her  Confederate  ships,  we  must  show  oui"«elves 
able  to  repress  and  i)unisli  such  injuries,  or  sul)ject  oui"selves  to 
wrongs  and  humiliation,  even  greater  than  these.  If  we  }>ropose 
to  assert  the  rights  of  our  French  and  German  naturalized 
citizens  against  the  oppressive  military  regulations  of  those  two 
great  ])Owers,  we  must  be  able  to  punish,  as  well  as  to  complain 
and  threaten.  But  in  order  to  deal  successfully  with  either  France 
or  Great  Britain,  or  any  other  great  European  power,  we  must  pos- 
sess the  means  to  create  ijreat  armaments,  and  caiTV  on  hostilities 
on  a  gigantic  scale.  If  another  great  rebellion  should  arise  within 
these  States,  or  war  should  be  waged  upon  us  from  our  frontiers, 
or  upon  our  long  and  exposed  line  of  sea  coast,  what  would  save 
us  from  dismemberment  and  overthrow,  but  the  ability  to  raise 
great  armies,  and  create  a  great  navy,  wherewith  to  vancpiish 
our  enemies?  What  would  have  ])ecome  of  us  during  our  late 
struggle,  if  the  means  had  not  been  forthcoming  to  suppress  the 
rebellion  i     In  that  event  there  would  to-day  be  no  great  Ameri- 


52 

can  Republic.  Money  is  the  sinews  of  war.  Men  cannot  be- 
paid,  ships  built,  supplies  furnished,  armies  moved,  a  navy  equip- 
ped, a  nation  set  in  motion,  without  money,  and  without  a  vast 
supply  of  money.  The  huge  and  rapid  movements  of  military 
operations  in  our  days  cannot  be  carried  on  without  Public 
Credit.  The  nation  that  goes  into  war  must  simultaneously  go 
into  debt.  But,  what  if  tlie  Public  Credit  is  destroyed  ?  What 
then  comes  of  the  national  ability  to  make  war,  even  in  self- 
defence  ?  The  nation  that  is  unable  to  borrow,  is  unable  to 
make  war,  and  the  nation  that  is  unable  to  make  war,  is  a  nation 
undone. 

Such  is  the  dilemma  into  which  we,  or  any  other  nation, 
would  be  plunged  by  the  destruction  of  the  Public  Credit.  In 
that  event,  we  should  become  the  helpless  prey  of  any  great 
foreign  power  that  chose  to  assail  us.  The  nation  would  speedily 
dissolve,  and  fall  to  pieces  of  its  own  weight.  Taxation  might 
keep  us  above  water  while  the  sea  was  smooth,  and  peace  reigned, 
but  with  the  first  strain,  with  the  first  storm,  with  the  first  ex- 
ternal war,  or  the  first  great  internal  convulsion,  we  should  be 
helpless  for  self-preservation,  and  to  bottom  we  should  go,  where 
any  people  and  every  people  deserve  to  go,  who  could  display 
such  dishonesty,  and  such  imbecility,  as  a  deliberate  destruction 
of  the  Public  Credit  would  imply. 

It  seems  sufficient  to  present,  even  thus  briefly  and  imper- 
fectly, the  consequences  of  such  an  insensate  proceeding,  to 
deter  even  the  most  ignorant  and  unprincipled  from  advocating 
a  policy  in  our  finances  that  looks  to  such  a  result. 


AA    000  590  45 


rv  .'  . 


.^'HlETIIHoiT 


HG 

525 
P63r 


